MBIT Thesis

Mobile Virtual Network Operator (MVNO)

Professor: Author:
Date

Dr. Gregory Yovanof T. Bassayiannis
08/12/2008

Table of Contents
1. 2. Mobile Virtual Network Operator (MVNO) - Abstract ..........................................................................5 The MVNO ..........................................................................................................................................6 2.1 The Beginning of MVNOs ...........................................................................................................8 2.2 The Value-chain & Value Net ...................................................................................................12 2.3 The players ...............................................................................................................................15 2.4 Mobile Solutions .......................................................................................................................16 2.5 Characteristics of an MVNO .....................................................................................................16 2.6 A typical MVNO Business Model ..............................................................................................17 2.7 MVNO Defined From a Customer Perspective.........................................................................17 2.8 MVNE (MVNO Enabler)............................................................................................................19 2.9 MVNO & MVNE ........................................................................................................................20 2.10 Why MVNOs make sense.........................................................................................................20 2.11 Key driving factors enabling the MVNO opportunity .................................................................22 2.12 The MVNO opportunity .............................................................................................................22 2.13 MVNO opportunities increase with 3G rollout...........................................................................22 2.14 The overall MVNO business context ........................................................................................23 2.15 MVNOs Backgrounds (Legacy and Next generation MVNO Models) ......................................24 2.16 Where is the MVNO today ........................................................................................................26 2.17 Next generation MVNOs...........................................................................................................26 3. MVNOs: Identities and Distribution ...................................................................................................28 3.1 MVNOS Global Initiative ...........................................................................................................28 3.2 MVNO Global market share......................................................................................................31 3.3 The Future of MVNOs in the 3G Era ........................................................................................32 3.4 Global MVNO Distribution.........................................................................................................32 3.5 MVNO Global Market Forecast (2006-2012) ............................................................................33 3.5.1 The Customer Segments......................................................................................................33 3.5.2 The Revenue Model (an example) .......................................................................................34 3.5.3 MVNO business Models .......................................................................................................34 3.6 MVNO Adoption in Europe - 151 MVNOs.......................................................................................40 3.6.1 Fixed telephony MVNOs in Europe ......................................................................................40 3.6.2 MVNO/MNO European Market share ...................................................................................41 3.6.3 MVNOs in Europe: numerous initiatives, very few successes ..............................................41 3.7 MVNO Adoption in Greece .............................................................................................................42 3.7.1 The MVNOs in Greece .........................................................................................................42 3.7.2 Mobile Network Operators customer base (June 2008) .......................................................43 3.7.3 MVNO Figures ......................................................................................................................44 3.7.4 MNOs ARPU and AMOU......................................................................................................44 4. MVNO/ MNO/ MVNE Benefits and Drawbacks .................................................................................45 4.1 Advantages/ Benefits................................................................................................................45 4.2 Disadvantages/ Drawbacks ......................................................................................................46 4.2.1 MVNE trends ........................................................................................................................48 4.2.2 MVNE Uses in Europe..........................................................................................................48 4.2.3 MVNO-MVNE-MNO Functional Model .................................................................................49 4.2.4 Viability of Virtual Mobile Players..........................................................................................50 4.2.5 Sustainability.........................................................................................................................51 4.2.6 Brand identity in Mobile Services..........................................................................................51 4.2.7 Type of Companies attracted to the MVNO Model ...............................................................52 4.2.8 VALUE TO MNO...................................................................................................................53 4.2.9 VALUE TO MNO & MVNO ...................................................................................................53

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4.2.10 VALUE TO MVNO ............................................................................................................53 4.2.11 Different approaches to mobile services...........................................................................54 4.2.12 Execution & Fulfilment ......................................................................................................56 4.2.13 Business Planning ............................................................................................................56 4.2.14 Business Design ...............................................................................................................57 4.2.15 Business Infrastructure .....................................................................................................57 4.2.16 Production Support ...........................................................................................................58 4.2.17 Conclusion ........................................................................................................................59 4.2.18 MNO Motivations (to host MVNOs)...................................................................................60 4.2.19 Host MNO Benefits ...........................................................................................................60 4.2.20 Host MNO Requirements..................................................................................................61 4.2.21 Host MNO Wholesale Business Potential (Example) .......................................................61 4.2.22 The MNO Perspective ......................................................................................................61 4.2.23 The MVNO Perspective ....................................................................................................62 4.2.24 MVNOs rationales.............................................................................................................64 4.2.25 MVNOs positioning ...........................................................................................................64 4.2.26 Key challenges faced by MVNOs .....................................................................................68 5. The MARKET structure & opportunities ............................................................................................70 5.3 MVNO market drivers ...............................................................................................................70 5.4 MVNO market structure ............................................................................................................70 5.5 Market size ...............................................................................................................................71 5.6 MVNE value..............................................................................................................................71 5.7 Aggregation business model benefits.......................................................................................71 5.8 Key Requirements ....................................................................................................................72 5.9 Competition is intensifying –mobile premiums decrease..........................................................72 5.10 Local scale is key to achieving EBITDA margin ambitions .......................................................74 5.11 Operators need to adjust ..........................................................................................................74 5.12 The challenger strategy must be tailored to the market environment.......................................75 5.13 Marketing strategies .................................................................................................................75 5.14 Timing .......................................................................................................................................76 5.15 Provider Selection criteria.........................................................................................................77 5.16 MVNO Services ........................................................................................................................77 6. MVNO BUSINESS SETUP ...............................................................................................................80 6.1 Setting-up Strategies ................................................................................................................80 6.2 Key Issues MVNO players are faced with ................................................................................80 6.3 Issues per player ......................................................................................................................81 6.4 Targets per player.....................................................................................................................82 6.5 Business Case Structure ..........................................................................................................82 6.6 MVNO Business Guide.............................................................................................................83 6.7 The MVNO Business: High Entry Barriers and Risks ...............................................................83 6.7.1 Barriers .................................................................................................................................83 6.7.2 Launch Risks ........................................................................................................................84 6.8 The future of MVNOs................................................................................................................85 6.9 Implementing an MVNO ...........................................................................................................86 6.10 Modeling MVNOs: The Big Picture ...........................................................................................90 6.11 Critical Success Factors ...........................................................................................................94 6.12 Closing remarks........................................................................................................................96 7. Conclusions.......................................................................................................................................97 7.1 Conclusions & Lessons to be learned ......................................................................................97 7.2 Conclusions regarding the future....................................................................................................98 7.3 Three improvement suggestions ....................................................................................................99 8. References......................................................................................................................................100

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9. Annex 1 - Case Study – Western Europe Cellular revenues ..........................................................101 10. Annex 2 - MVNO Experience ......................................................................................................107 Annex 3 - Glossary................................................................................................................................109

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1. Mobile Virtual Network Operator (MVNO) - Abstract
This thesis addresses the phenomena of Mobile Virtual Network Operators (MVNO): often MVNO do not come from the telecom sector but they rent the network of mobile operators to become fully mobile operators on their own. So they compete directly not only with the other mobile operators but also with their hosting mobile operator. Hosting MVNOs, supporting them from both operational and commercial perspectives are new challenges for the mobile operators: they have to set up a specific internal organization because they used to be a vertically integrated industrial structure. All of this represents tremendous changes for them. The aim of the thesis is to research and analyze the current status of the MVNO industry, present different views on implementation approaches, identify markets and market segments served, note weaknesses and strong points, refer to successes and failures, research current legislation(s)/ regulatory aspects (that are an essential driver for the liberalization of network economies) and in general show the industry’s evolution path over time. The key element is to see if the MVNO is able to increase the efficiency and competitiveness of mobile markets in specific. Additionally, starting from the Western European market, an effort will be made to specifically analyze the case in the Greek MVNO market by providing some specific data such as type of service (prepaid/postpaid), airtime replenishment volumes (prepaid case), brand awareness, market segments, penetration/ adoption rates, etc). Having gone through the MVNO insights at the end, a description of all the steps involved for an entity/ business, in becoming an MVNO from scratch (in the form of a generic guide) will be prepared. A stepby-step approach will be used for implementing a Mobile Virtual Network Operator (MVNO), stating actions to be adopted and mistakes to be avoided. Given that most of the current implementations have followed different/ diversified paths (depending on the market needs to be served each time as well as the intended capital investment by the MVNO candidates), an effort will be made to come up with guidelines (hopefully the most suitable ones, having learned from former/recent MVNO adoptions) for aiding such future implementations. Another important aspect is the modeling of a mobile network: the MVNOs will use some components while other components are un-useful for them. Without such model, it is impossible to derive the right costs and price to be charged to the MVNO in order to have a win-win industrial model for both the MVNO and its hosting operator.

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2. The MVNO
There is a lot of definitions for MVNOs in the sector but a sound definition of virtual operators would consist in saying they are actors not totally integrated who lack at least a part of the asset at the basis of the network.. Applied to mobiles, this means they do not own the radio access. However they supply to the market a complete mobile service and they own partially or totally their customers. They rent at least the radio access to their hosting operator but nothing prevents them to rent more than that to the operator as some elements of the service provided to the end user (billing, contact center, …). They also complete the radio access by their own assets like a transport network or some switching infrastructure. However MVNO today are most of the time simple resellers of mobile services that the hosting operator operates technically. Scarcity of spectrum has allowed only 3 to 5 mobile operators with a full infrastructure per country via a licensing process. However it appeared quickly this number was insufficient to have a fully efficient (and competitive) market despite the existence of 3 to 5 competing networks. National Regulatory Authorities (NRA) has seen MVNO as a (too) quick remedy at least for the access mobile market. This new kind of actors was deemed to bring more competition (which is not an objective in itself) that would boost innovation and economic welfare. Today NRAs consider other remedies like spectrum trading as a means to enable more innovation in wireless sector. However MVNO remain an efficient means to break the vertical integration of MNO that is considered by some authors as one of the root cause for a player not to innovate any more; the MVNO comes indeed between the MNO and the end user. Other authors consider on the contrary that vertical integration allows economies of scale and scope that amortizes more easily investment. It is an incentive to take more commercial and financial risks. MVNOs too use 3rd parties for their own innovation so that this argument may not sound completely true. The multiplication of wireless technologies, the emergence of UMA and IMS will demand new players active on multiple networks without having the opportunity to own all of them. They will become de facto virtual operators on other’s assets to operate their services seamlessly across networks and technologies. Such virtual operators will be innovation-driven. Another more accepted obstacle to innovation in network economies are the guaranteed incomes that mobile operators can expect due to their oligopoly situation. The mobile sector is indeed a kind of oligopoly with guaranteed income. MVNO can break this situation as the guaranteed income is based on the difference between the costs of the network (assets), the revenues and the limited number of players. An MVNO does not own a network and is not stuck to this logic.

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home location registers (“HLR”) and cellular mobile services. In most cases. So. Full MVNO Owns everything (including HLR) except the radio network equipments. Full MVNOs are able to secure their own numbering ranges. They are dependent on MNOs for network facilities. full MVNOs are likely to require a network facilities provider (“NFP”) individual licence and a network service provider (“NSP”) individual licence for the network facilities and network services that they own or provide. A full MVNO is one that owns or provides network facilities and network services such as towers. Additionally. billing and customer care. operate its own HLR and offer its own SIM cards with its own mobile network code. enhanced service providers are those who do not own or provide network facilities but have the ability to secure its own numbering range. other form of MVNOs and MNOs as resellers have direct relationship with end users. enhanced resellers rely on MNOs for access to the radio network and network facilities. In addition. Enhanced resellers are primarily distributors who resell services provided by MNOs. ESP: Enhanced Service Provider (Hybrid MVNO) Procures their own SIM cards and controls a few network elements. resellers are completely dependent on MNOs for every aspect of service provision. and will to some extent be analogous to local loop unbundling (LLU). mobile switching centres. Enhanced resellers may require NSP individual licence if they provide bandwidth services. While they may still be able to offer their own branded packages. Enhanced resellers are likely to carry out customer care and billing in house. Enhanced service providers may require NSP individual licence if they own or provide bandwidth services. MVNOs are considered as independent service providers willing to access the mobile operator’s radio network in order to develop and sell product and services competing directly with the mobile operators. As with enhanced service providers. These service providers are still able to maintain some independence from MNOs as they are able to differentiate their products. full MVNOs will require an application service provider (“ASP”) licence in order to provide public cellular services to end users. cellular mobile services or mobile application services and an ASP licence for providing public cellular services. end users will not be able to make a distinction between resellers. A key feature that distinguishes a full MVNO from other business models is its ability to operate independently of the MNOs. The key feature that distinguishes enhanced resellers from enhanced service providers is that enhanced resellers do not have their own SIM cards. MVNO Page 7 of 110 . However. cellular mobile services or mobile application services and an ASP licence to provide public cellular services to end users. MVNOs that operate as resellers are likely to require an ASP licence. as well access to radio network. So. offer its own SIM card and have full flexibility on the design of the services and tariff structures. This type of access could be regarded as unbundling of the radio subsystem in the mobile telecommunications network.There are different kinds of MVNOs Classic Service Provider (reseller of the GSM operator offers) Resellers merely resell subscription to end users. they will not be able to distinguish their services by their MNC.

Using the mobile network of the former state operator TDC. Perhaps more importantly. but gradually it increased mainly by word of mouth. "In the beginning. the market can accommodate a few extra niche players.1 The Beginning of MVNOs It all started in 2000 in Denmark with what was then a small start-up called Telmore. This first MVNO model however has paved the way for others to follow. Pictorially the different kinds of MVNOs can be seen below: Radio access Host MNO Host MNO Host MNO Switches & other network elements Services & content CRM & Billing Marketing & branding Distribution Reseller Enhanced Service Provider Full MVNO NOTE: GSM operators are referred to as « MNO – Mobile Network Operators » Therefore in short each of the business models practically means that: Reseller: Enhanced Reseller: Buys bulk airtime from the MNO and resells to target segments Offer their own branded packages but they will not be able to distinguish their services by their MNC. They prepaid a single per-minute rate regardless of what time of day they made a call or whether they called a mobile or fixed line. within a 10-month span. using phones they already owned. Provides services over the mobile platform Combines the reseller and the service provider business models Owns portion of the mobile network with or without SIM cards depending on choice of mobile technology of the MNO Has more control of the mobile network and enables mult operator agreements Service Provider: Enhanced Service Provider: MVNO: Complete MVNO: MVNO Page 8 of 110 . Along those lines. the price of a prepaid minute in Denmark had dropped by 50 percent. Enhanced resellers are likely to carry out customer care and billing in house. If they can hold their nerve and not panic and accept some leakage. however pioneering. Telmore launched an MVNO business solely online. Customers bought SIM cards only (solely on-line). MVNOs though will only really have an impact if the incumbents lose their nerve on price and try to follow them down. it went slowly. this first online SIM-based concept was a niche concept and targeted only a small share of the market.2. Telmore had attracted 10 percent of the mobile market. Within three years.

The figure below shows a typical MVNO infrastructure showing (in green) what a ‘thin’ one might provide and the additional features (in blue) that a ‘thick’ MVNO could offer MVNO Page 9 of 110 . overseas-call routing. usually with simple Internet access and some premium content services. and WAP gateways. ‘Thick’ MVNOs. They won’t be able to provide custom facilities like voicemail. This allows these virtual operators to provide advanced services such as VoIP. voicemail. email services separately from those the host MNO can support. more sophisticated email products or custom-built handsets. They will establish their own tariffs. customer care mechanisms. ‘Thin’ MVNOs will normally source their own billing and customer care services. in addition to their own billing and customer care. will frequently run some of their own network services.Depending on the extent of involvement/ adoption in the value chain. advanced messaging (MMS or SMS) services. and provide their customers with basic voice/text services. typically SMS or MMS. routing for overseas calls. some other way of looking at the business models involved can be seen below. or offer advanced Internet.

MVNO Page 10 of 110 .Infrastructure Matrix Offered primarily to nontelecom companies or telecom companies wanting to diversify without significant investments Offered to companies with some experience in telecommunications who can take over some of the responsibility for providing key services Network Rollout The mobile network roll-out follows three MVNO Lifecycle clear stages.

Strategy Development. Traditional billing systems do not meet the requirements of an MVNO MVNO need Low TCO Motivation Insufficiencies today • Fewer subscribers to carry total cost of billing • • Solutions do not scale down costefficiently Incomplete solutions Easy introduction of new services • • • Limited billing competence Excellence in time to market critical The core business and growth opportunity Focus on core business with lean organization • • Products build to be run by large billing departments Cross-product dependencies Future-proof growth into mobile and VAS Opportunity for outsourcing • • Legacy products lacks in architectural flexibility MVNO Page 11 of 110 . offer packaging. (through all the technology and support needed) to service the target market and start generating revenue.

spectrum. depends on the state of competition. Potential Entrants.2. profit) it can be said that MVNOs fall between emotional and spectrum enables (between service and network operators. or between ASPs. Substitutes and Rivalry among existing firms – depends on some major factors and characteristics listed in the work of Porter. ISPs and Portals from one side and Mobile Network Operators from the other) The standard approach to the analysis of industry attractiveness is Michael Porter’s Five Forces framework. physical. The figure below gives a picture of the Porter’s “Five Forces” framework: The power of the five forces – Suppliers. which has become the standard approach to these analyses. The attractiveness of an industry. The state of competition in an industry depends on five basic competitive forces.2 The Value-chain & Value Net The Value Chain By looking at the value chain and considering the involved enablers (Technical. An effective competitive strategy according to this approach takes offensive or defensive action in order to create a defendable position against the five competitive forces. MVNO Page 12 of 110 . such as the telecommunication industry. Emotional. Competition in an industry is rooted in the underlying economic structure of the industry. In his book ”Competitive Advantage” [4] Michael Porter suggested analyzing the “cost leadership” and “differentiation” strategies by means of the value chain model. Buyers.

Complementors are added as a new dimension. Figure 2 gives a picture of the Value Net of a company. Figure 2: The Value Net A player is a complementor if customers value your product more when they have that player’s product than when they have your product alone.Figure 1: Porter’s Five Forces The Value Net The Value Net can be seen as a generalization of the Five Forces framework. MVNO Page 13 of 110 . A player is a competitor if customers value your product less when they have that player’s product than when they have your product alone. The Value Net emphasizes that the value to the customers can depend on a package of complementary services and/or products. Logically. Complementors will influence the attractiveness of an industry.

Therefore. The set of arrangements between the different actors will include how profit. a value network can be seen as a web of relationships that generates economic value and other benefits through complex dynamic exchanges between two or more individuals.Also. a new value network with different types of interactions between stakeholders will be needed in the new MVNO market. realise their own strategies and goals. that when brought together. risk and revenue sharing are arranged.include two primary subcategories: Knowledge and Benefits. services or revenue 2. network providers. and service providers to offer personalized services to mobile users in a way that suits their individual needs at a specific place and time. The fact that consumers would like to have only one billing relation will most likely consolidate the number of actors. in an MVNO implementation an extended personalization concept is presented that enables value networks of content providers. To that extend. The value network is important part of the organisation design presented by Faber [Faber 2005]. will create value for the customers and at the same time. New networks will consist of many different actors that have certain resources and capabilities. Two primary types of value can be distinguished: 1. Tangible value exchanges .involve all exchanges of goods. MVNO Page 14 of 110 . Intangible value exchanges . investment. cost. groups or organizations.

Examples of models belonging to the Service centric category are the WEB 2.Model_1 (Flickr. Network effects help to drive the adoption and value of the service. facilitating the business model. The Service Provider bundles this seamless access with a number of aggregated services. to network etc. YouTube): The business model is based on network effects created by a user base and user interaction.MVNO . . Technology is important as an infrastructure tool. offering a compelling value proposition. A community is built around content like User Profiles for MySpace or interesting Blogs as is the case for Gawker. Sometimes the SPs syndicate their content to 3rd parties like Google or Yahoo. MVNO Page 15 of 110 . 2. to content. Skype): The model is based on technical innovation. as well as operators.A Service Centric Business Model In the Service Centric Business Model a Network Provider offers seamless access on a number of core and access networks. Value adding services are being offered as a premium for which the customer has to pay. This is the case exactly for all MVNO types.Model_2: (MySpace.3 The players Along the value chain. the involved parties/ players include several types of providers ranging from service.0 services: .

• Main added value that MVNO provides is billing and customer care functions.4 Mobile Solutions An overview of the ICT component when implementing different MVNO types is as follows: 2.Content Provider Mobile Application Providers Mobile Marketing System Integrators Internet Service Providers Content Value Addition Delivery Enterprises / Mobile Subscriber Internet-to-mobile service providers Modem-based service providers Short-Code Operators MVNOs (for Data Services) MNOs 2.5 Characteristics of an MVNO • MVNOs are new breed of wireless network operators who may not own the wireless spectrum. or wireless infrastructure but give a virtual appearance of owning a wireless network. MVNO Page 16 of 110 . • MVNOs generally provide both voice and data services to end users through a paid up subscription agreement. In that sense MVNOs own the customers. These operators lease the wireless capacity from traditional operators and then repackage it for a specific vertical industry application.

rather than just a brand. MVNEs develop systems and processes to help facilitate MVNOs. and moreover Next Generation MVNOs. as an MVNO is a customer driven. Rights management. That is in Greece for example Frog is seen to its customer as their network provider. It buys access from a host carrier—often perminute or per-megabyte—and resells it under its own brand and marketing. we have to look outside the legacy network led definitions of an MVNO. Marketing. MVNO Page 17 of 110 . From a customer perspective both the MNO and the MVNO are their "Network Provider". The term ‘MVNO' has become a catch-all for any consumer reseller.6 A typical MVNO Business Model At its most basic level. and therefore business driven business model. That doesn't mean upstarts wanting to become MVNOs can't succeed. a customer base. they need unique and compelling data services. just as Cosmote is seen as a network provider. • An MVNO usually provides: Brand. Different functions can be carried out by the MVNO or MNO. Success for those companies depended on delivering high-quality service. 2. one should cobble together a partnership that consists of a connectivity of a regular Telco. not the host MNO (Cosmote). channel management or billing. so there can be seen a variety of business models. billing platform. such as handset distribution. and a sales channel. Most important. customer care and content delivery. with existing points of distribution and an already installed base of customers. But a classic MVNO minimizes capEx and keeps expenses as successbased as possible.• To become an MVNO. as evidenced by Virgin or Boost—neither of which were pre-existing brands in the mobile space at their inception. Considering the typical retail and network elements involved in an MVNO. there is a range of MVNO classifications/ types between Service Providers (SP) and full MNOs. MVNOs typically have a strategic intent focused on a recognized brand. an MVNO is a standalone entity. That means leveraging outsourcing solutions for billing. Some may be carried out by a Mobile Virtual Network Operator Enabler (MVNE) which may simplify the MVNO provisioning for either the MVNO or the MNO. Portal. Customer base 2.7 MVNO Defined From a Customer Perspective To Fully understand the MVNO.

invoices. handset. care centres. other point of sale. MVNO Page 18 of 110 . or starter pack USE for calling.Source: Christian Borman -2006 Customer experience The customer’s perspective is a simple four-stage process: Buy -> Use -> Pay -> Care BUY a SIM card. or other services PAY recharge or other payment method CARE get advice with questions or problems There are different ways of handling each stage: from the internet through to stores. SMS. the handset itself.

and thus becoming MVNOs. fulfilment. These outsourced services include: Data Services. Instead. MVNO Page 19 of 110 . MVNE is a service company delivering tools & services to companies wishing to market their services over a mobile network. distribution channels. The Limited MVNE is also the intermediary between the host MNO and a Reseller or Service Operator. it acts as an enabler for any number of MVNOs. content management and settlement. Content Management. an MVNE provides infrastructure (will interface with carriers to deflect the risk and costs) and services to enable MVNOs to offer services and have a relationship with end-user customers. An MVNE does not have a relationship with end-user customers. Revenue and Service Continuity Assurance etc. but with partner companies creating the end-user services and interacting with the customer. operation and evolution of the MVNO service is handled by the MVNE. order management. Invoice and Settlement. service assurance. Service Provisioning. MVNEs form the backbone of an MVNO’s business of wireless Network Services providing help in broad areas of product development and marketing. SMSC. An MVNE offers infrastructure and related services ranging from network element provisioning. Those companies are referred to as “MVNO candidates”. For example. Some MVNOs want to completely rely on the underlying wireless network infrastructure of the host mobile network operator whereas other MVNOs want to own and/or control their own network elements.8 MVNE (MVNO Enabler) Most MVNOs will lack the experience of dealing with handset manufacturers and establishing upstream and downstream systems for service creation. billing. The set-up. MVNEs collect usage data and handle rating and billing functions. the MVNE does not directly provide services to mobile users. but cannot offer the service innovation that a Full MVNE can provide. An MVNE provides the technical architecture and may enter into a wholesale agreement with a host MNO. MMSC. Customer Relationship Management. administration and operations to OSS/BSS support. an MNO can also become an MVNE in order for it to directly support MVNO Resellers and Service Operators. This type of MVNE parallels the Full MVNO by implementing the same technical architecture and host MNO wholesale agreements. a MVNE can provide HLR. The Full MVNE is the intermediary between the host MNO and a Reseller or Service Operator.2. Marketing functions are handled by the MVNO candidate: brand. Instead. Profile Management. MVNEs often provide the “middle-ground” between MVNOs that do not want to have any control over network elements and those that want complete control. to enable mobile service provision. However. and may go so far as to handle provisioning. So a special case of the MVNO model is the MVNE. in much the same way as a Service Operator. as well as more advanced network elements such as GGSN. customer base. Billing. such that: • Full MVNEs operate a core mobile telecommunication infrastructure. MVNE’s provide the middle-ground in the sense that they can provide options to MVNOs for what they bring in-house versus what they rely on the host carrier. In other words. customer care and data centres. In other words. Work Fulfilment. hence the creation of the MVNE. OSS/BSS. building the capability and capacity to enable wholesale services from MNOs. but leave the mobile service provision to partner companies. The operating scope of MVNEs mirrors that of MVNOs. • Limited MVNEs operate elements of the service delivery infrastructure. and other systems.

2. flexible service deployment and the operational simplicity of a hosting service. access to new service platforms. some reasons why MVNOs make sense may be: • Many of the growth markets in mobile are riskier segments like the youth market. some MVNOs focus on the low end. On the contrary. These companies tend to be largely prepaid. where voice is the primary product. The issue is. The technical issues of setting up an MVNE are similar to those faced by an MVNO. MVNEs seek to fill this gap by providing the flexibility to support diverse services provided by a number of segment-specific thirdparties. MVNO Page 20 of 110 . the credit challenged and those who dislike most operators' billing methods for minute overages. Whether an MVNO business model is sensible and acceptable to the marketplace is no longer a question. The difference is in the customer interface. In fact.9 MVNO & MVNE Some companies are mistakenly considering themselves as MVNOs. but it's largely a brand play. On the other side are the high-end players looking at postpaid services involving data and content. those MVNOs that succeed will do so largely because their network operator partners have incentive to help them. The idea that a mobile phone can lead to a customer's wallet and loyalty has a range of companies interested in the opportunity. At one side of the spectrum. Then there are instances where MVNO and MVNE overlap. They both need to support elements of the core network and service delivery platform infrastructure. One of the major issues operators consider with any market segment is risk. such as Virgin Mobile. but their networks still need minutes from somewhere else. It's arguable that the major mobile network operators could be opposed to helping MVNOs succeed. when they are really wireless resellers. the ideal MVNO actually complements and extend the network operator's offering. Financial markets are tough on operators if ARPU drops. entertainment and other industries.10 Why MVNOs make sense The mobile virtual network operator (MVNO) market is a crossroads for telecom.Providers supply components of the service delivery infrastructure to Resellers and Service Providers. These MVNOs tend to differentiate by brand and customer experience. 2. Leveraging an MVNE brings the MNO the benefit of significant wholesale traffic volumes from multiple third-party service providers. As a result their offerings need to be focused on specific audiences with a strong customer care component. so they cannot take on certain customer bases as a result. The MVNE is emerging because most MNOs have systems and approaches optimized to serve the mass market. The MVNE offers third-party providers economies of scale. community and content than they are technology. This often makes it difficult for them to efficiently support third-party suppliers that address niche market segments with services that differ from the host MNO portfolio. MVNOs are more about customers. but usually do not enter into a wholesale agreement with a host MNO. So. Sometimes there's a little data flavour. where the MVNE is selling B2B. the large operators are actively chasing markets within their risk threshold.

all packages. control data. Failure Examples - Success Examples MVNO Page 21 of 110 . • Building an MVNO will take an enormous amount of cash. radio and the Internet to create compelling communities of interest that will. allowed it to effectively de-risk entrance into the pre-paid youth market. customer care support and various kinds of software. to be spent on advertising. • The MVNOs that prove successful seem likely to win for three primary reasons. The large mobile operators generally offer one-size fits. Affordable prices and straightforward tariffs structures are the cornerstone of all offerings. Partnerships forged with network operators. Virgin Mobile USA LLC. As an example. Much of the market is satisfied with a generic plan. These companies attract or bring with them more content. o First. o Third. they will use content. but a growing number of subscribers want something more personal. o Second. non-telecom companies interested in MVNOs . wholesale network and content services. successful MVNOs will target segmented audiences that don't threaten their network partners' retail businesses. Multi-brand concept–tailored to suit the relevant target group. nor will be so virtual they fail to maximize their customer relationships.• Another reason MVNOs make sense for operators is their focus on personalization. access customers. Sprint's MVNO partner. and vice versa: Thus selection criteria must be devised by the MNO. • Another reason MVNOs make sense for operators is that they provide an opportunity to gain strength through relationships with larger. they will not underestimate billing and customer care.like Virgin. but promise to add minutes to their networks. encourage usage and brand loyalty. billing and customer interactions. partnerships. in addition to platforms like television. The Walt Disney Co. Focus on core services–products and services with well-established demand. their own brand loyalty and. in turn. and other media properties. ultimately. as they had a brand and shared in the cost. All that cost is an undesirable burden to an MNO (specifically for targeting niche markets). however at the same time is a key driver for the MVNO’s need to become known. to ensure MVNO-focused partnerships are complementary to their business in terms of distribution. more money to invest in building future mobile network and application infrastructure. • Key success factors for MVNOs The successful development of an MVNO requires the mastery of six key success factors: Possessing a strong brand and being able to transpose it to new markets Disposing of a wide distribution network adapted to the target customers Disposing of a known and addressable existing client basis Bringing to the market innovate offers in terms of price and/or content/services Being customer and service quality oriented Disposing of sufficient financial capacity to establish a long-term presence on the market Must create the right mix of products and services Support it with the correct infrastructure.

3G will allow them to focus offerings equally on data.12 The MVNO opportunity 2.11 Key driving factors enabling the MVNO opportunity • Western Europe mobile market is reaching saturation since: o in the Nordic countries are already saturated at 90% o the introduction of pre-paid subscriptions has had a large impact • Deregulation opens the mobile markets to competition as: o there is no need for own spectrum licenses or radio networks o there are Regulator-controlled interconnection prices • The focus in revenues is expected to shift from basic services to more content-based value-added services. evolution towards IP over everything o New entrants may have excellence in content-creation o Increasing shift from voice to data services is being observed 2. that could potentially be broadened to include roaming as well MVNO Page 22 of 110 .2. Some of the opportunities identified for potential MVNOs include: -.13 MVNO opportunities increase with 3G rollout 3G offers MVNOs an exciting opportunity to offer users a rich multimedia experience.Focus on a pan-European offering allowing for low-price calling while roaming abroad -.Focus an offering for enterprises. whether based on voice or data. While many of the MVNOs today are offering low-cost pricing (voice and SMS).Focus on offering convergence -. So: o There will be Convergence.Focus on 3G and in particular data such as mobile music or mobile sports -.

This will certainly provide the company with a competitive advantage and allow it to build its brand and raise awareness in the marketplace. handling financial transactions (m-commerce) and gaining a lot of new partners (for content. Where Mobile Network Operators are generating about 90% of their revenues in GSM by selling network capabilities to their subscribers. It also addresses opportunities for new companies looking to enter this space. Mobile Network Operators are facing pressure from financial institutes in order to reduce their ROI period. This in turn will allow MVNOs to personalize their data offerings. Mobile Network Operators envisage therefore increasing their revenues and optimizing the usage of their network capacity by opening their network to MVNOs. it is important to focus on niche markets and get to market sooner rather than later. Due to the investment related to UMTS technology and the price of UMTS licenses in some European countries. and there are also opportunities for IT companies and those that specialize in data. m-commerce. So the market for MVNOs opens up the space for established and new players such as billing and customer care companies to sell into. That situation is changing with the introduction of broadband wireless services. Mobile Network Operators will have to face challenges like managing their new network (new technology). Therefore MVNOs with their respective background can optimally solve some of Mobile Network Operators challenges in the frame of a win-win agreement. Traditional 2G Mobile Network Operators tend to keep end user ownership instead of opening their radio access network to MVNOs. MVNOs represent definitively one of the best solutions to their concern. Mobile Network Operators would face far more difficulties in mastering the UMTS challenge. advertising. MVNO Page 23 of 110 . which can increase usage and reduce churn. Mobile Network Operators have to offer innovative services and deploy them very rapidly on the market. their ROI period is not likely to be shorter than 7 years. According to the most optimistic business cases. Entering the 3G area.14 The overall MVNO business context In 2G. To remain competitive. 2. The insight Opportunities for MVNOs in Western Europe. because alone. in UMTS 40% of the revenues will come out of the broadband wireless data services (portal and content applications). etc.For any new MVNO. MVNOs are the direct provider of services to their subscribers and not merely an entity that puts its content on the services offered by carriers. As MVNO get ownership of their subscribers they act much more as a full service provider than a content provider. Partnership with an MVNO is for them one of the most important success factor. As such the MVNO actively contributes to the business development of Mobile Network Operators (business complementary). Billing and customer care is just one opportunity. network operators generate about 90% of the revenue by selling voice services and simple data services to their subscribers.). analyzes developments in some key Western European countries and major companies. Most of the consulting groups predict a shift in the mobile value chain. media partners.

In particular. which usually have not been used previously in the cellular area. The MNOs: • usually have their roots in the fixed line business • leverage on the existing network and ownership of spectrum licenses The MVNOs: • can emerge from a plethora of industries • leverage on strong brands and extensive distribution networks ISPs Fixed network operators Media companies Internet companies MVNOs Retailers Automotive & M2M Niche & Communities Financial institutions MVNO Page 24 of 110 .2. anyone that can offer innovative services and appeal to different demographic sections to target niche sectors and tailor services should be attracted to this market.15 MVNOs Backgrounds (Legacy and Next generation MVNO Models) MVNO backgrounds MVNOs are attractive to companies with strong brands.

media and internet industries Legacy and Next Generation MVNOs MVNO Page 25 of 110 .Another pictorial way of seeing the MVNOs entrants’ background can be seen below. Fixed network operators Media companies Consumer Electronics MVNOs Retailers Automotive Financial institutions Therefore MVNOs in particular may arise from: o Traditional landline operators planning to add mobile services o Mobile operators planning to enter into international markets o Companies with strong brand names o Companies who could not obtain 3G licences o Companies from telecom.

As the voice ARPU declines. supporting MVNOs brings with it burdens and risks for the operators. On paper MVNOs present operators with a way to realise revenue from spare capacity and target niche markets that are peripheral to their core business. MVNOs must differentiate themselves with new value-added services orientated around customer choice and a personalised customer experience. mobile commerce and location-based services. For example.16 Where is the MVNO today An explosion of the MVNO activity is taking place in the mobile marketplace. mobile TV.17 Next generation MVNOs MVNO Page 26 of 110 . ring tones. OTA music downloads and exclusive access to MySpace Mobile at no charge. For example. broadband and TV. games. However. to get revenues from the mobile market. multimedia messaging. Examples include mobile music. 2. While many MVNOs have entered the mobile market on a “pure voice play”. While the initial business model of creating new revenue streams without actually having to be an expert in the wireless industry still stands.2. today’s MVNOs are far from achieving a license to print money. MVNOs need to execute effective mobile data strategies and create innovative ways to differentiate their services to high-margin multimedia. data. An MVNO usually offers not only voice services but also value-added services or sometimes referred as mobile value-added services. Convergence has become the new driving force behind the Next-Generation of MVNOs. Three essential factors have emerged: 1. Qualifying the business cases of potential MVNOs to a network provider can therefore be time-consuming and distracting 2. which are a combination of voice. combining mobile and fixed line telephone services. graphics and video information. Virgin Media is now offering a quadruple play package. Many players from multiple industries are exploiting the MVNO model. their offerings are not very different than traditional mobile operators. Helio a US MVNO now offers its customers GPS-enabled Google Maps. location based and mobile commerce services. 3.

does not have infrastructure and act as host network resellers under their brand. nor duplicate exact elements of the host MNO. except radio access. The “Next generation MVNO” concept as evolution of existing first generation MVNO business model. this is to take into account the recent rise of convergence. MVNO Next generation Concept The "Next generation MVNO" concept refers to the creation of a global network with Europe wide coverage. consisting from all GSM/UMTS network elements. These will therefore be unlicensed Radio Access & Transmission elements. innovations. and centralized service platform. MVNO Page 27 of 110 .MVNO Next generation preface Next Generation MVNOs in general do not necessarily invest in. on opposite next generation MVNOs is going to have all GSM/UMTS network elements. nor will they be ad-hoc creations that require integration into the host MNO. based on completely different approaches: a transition away from price competition toward innovative and higher-value services. not licensed spectrum. Note the fact that the MVNO model now goes beyond the Radio Access & Transmission element. data offerings and customer care. except radio access. connected by broadband network and binded with each countries incumbents through interconnection agreements. offer sophisticated voice and data services and differentiate on services. but instead they will all reside on a single platform that interfaces with the Host MNO and grows infrastructure around its individual customer needs and requirements in order to never become a potential burden to its host MNO. If initially MVNOs offer simple discounted prepaid voice and SMS services.

performing unified and centralized service platform. Also to introduce and complete consolidation by horizontal merger of existing MVNO’s.1 MVNOS Global Initiative Description The “MVNO Global” initiative is to create Pan-Europe global alternative GSM/UMTS mobile operator and service enabler using full infrastructure Mobile Virtual Network Operator (MVNO) concept. “MVNO Global” strategy is to be build in EU’s “Lisbon Strategy” framework which strives to turn the EU into the world's most dynamic and competitive economy till 2010. rich and diverse content and digital services. and rising funds to expand globally.3. one from each country. “de facto” we still have very defragmented mobile market with considerable roaming and global services(112 and in vehicle emergency call service) implementation problems. “MVNO Global” mission is to promote and be the part of Single European Information Space offering affordable and secure high bandwidth communications. The industry players The target market is medium and high-end business and residential users. MVNO Page 28 of 110 . other MVNO’s and service and content providers willing to start global operations on company’s technical platform. The global footprint of operator should cover EU25 countries and beyond. Since the “de jure” EU is single market. MVNOs: Identities and Distribution 3.

MVNO Global footprint At first stage of project analysis of EU15 countries mobile markets will be performed in order to identify mobile market alternative key players and select those will be invited to negotiate aspects of fore coming merging process. In third stage other countries networks will be developed and connected. Throughout second stage all separate networks and service offerings will be upgraded to developed standardized platform. List of countries involved in project depending from implementation time frame: MVNO Page 29 of 110 .

centralized service platform and value of global brand name. • This rationale is particularly alluring to existing MVNO’s and SP’s operating in tough mobile markets like Denmark. hence companies together are more valuable than separate companies. Finland and Sweden. lowering the costs of the company and increasing profit.Mobile internationalization EUROPE Next Gen MVNO Transition process Benefits for existing MVNOs (According to Global Initiative) To create shareholder value over and above that of the sum of the companies. • The companies should come together to benefit from economies of scale. • The companies in addition benefit from synergy: better use of complementary resources. MVNO Page 30 of 110 . thus reducing duplicate departments or operations.

Centralized and unified LBS. Every GMSC should be connected to countries MNO: host mobile network operator.2 MVNO Global market share MVNO Page 31 of 110 . etc. MVNO Global network topology MVNO Global network should consist from GMSC equipment in each country connected to each other by broadband connections. In each country Global MVNO should have its own MNC and IMSI range. SMSC. SIM cards Java toolkit. 3. Service platform and applications should be centralized. as much it is technically possible in order to reduce CAPEX. HLR. MMSC. Each country’s GMSC is connected to other incumbent operators under terms of interconnection agreements. WAP.Technical platform • • • • • • FULL infrastructure MVNO model: GMSC. OTA platform implementation. Centralized customer care and billing applications. Roaming agreements should be signed to rest of the worlds GSM networks.

Planned MVNOs . Israel. Malaysia. Hong Kong. South Africa. Russia. Japan.0 Source: FirstPartner 2007 3. USA Rest of the World .63 MVNOs Canada. New Zealand.4 Global MVNO Distribution North America . Dutch Antilles. Singapore. Taiwan. Réunion. This will result in MVNOs accounting for a 3% market share of the total mobile market by 2013.3 The Future of MVNOs in the 3G Era 2006 Market Map: European MVNO 3. Zanzibar .3. with 63 million of those subscriptions coming from Western Europe.41 MVNOs Australia.53 (not regionalised) The global market for MVNOs will reach 150 million subscribers by 2013. MVNO Page 32 of 110 . Ukraine (linked to Russia).

shifting end-user demand trends and possible changes in the supply environment.3. 3.5 MVNO Global Market Forecast (2006-2012) The global MVNO market from 2007 is likely to be impacted due to technological factors.5.1 The Customer Segments MVNO Page 33 of 110 .

2 The Revenue Model (an example) 3. if they weren’t currently strapped for cash.Companies with fixed network licences in several countries and its own international backbone.3 MVNO business Models The sort of companies most likely to become a virtual operator could be: . All those fixed network operators that failed to win 3G licences then.5.5. Also. Building on this would enable such companies to offer a degree of mobility to their fixed network customers and reduce their cost base for calls made from and between countries in which they operate.3. .Another likely profile would clearly be a well-known company wishing to capitalise on its brand name and with a strong customer base The most established business models are focusing on the support of services and customers MVNO Page 34 of 110 . this provides a basis to offer a common look and feel to their services.

Content / brand owners can enhance & extend the wireless market MVNO Risks Unfavourable wholesale agreement & restrictions Hostile pricing by MNOs . MNOs .Less time to cash flow breakeven .Lower operating margin and capex vs.Source: FirstPartner MVNO Business Case .MNOs gain access to customers that are difficult to target .unlimited call tariffs & SMS bulk bundles SIM locking Difficulty in setting appropriate relationships with handset vendors Traditional MVNOs Rigid wholesale contracts Lean staffing structure Selected channels Simple products Very easy to understand tariff SAC lower than MNO Lower ARPU than MNO MVNO Page 35 of 110 .

Next Gen MVNOs Flexible wholesale contracts Dedicated customer care team Augmented distribution capacity Innovative content and service offerings Flexible tariff SAC similar to MNO Higher ARPU than MNO Fixed Telephony possible MVNO models MVNO Page 36 of 110 .

2007) Fixed Operators are the only ones with experience in both voice and data services. while for the rest is another opportunity In MVNOs mature countries the ratio MVNO/MNO is approximately 5:7 MVNO Page 37 of 110 .Source: AGCOM 2007 –MERRILL LYNCH 2007 ACCENTURE ANALYSIS (Nov.

full MVNOs possess 30% of the total. 47m by 2009 UK: 5. 9% UK mobile revenue Source: FirstPartner MVNO Market Trends MVNO Page 38 of 110 . 13% of UK mobile users.For the above sample of European Countries (the most mature). the highest price reduction is observed (due to competition). Full MVNOs and Service Providers constitute approximately 69% of the total MVNOs number.5m MVNO subscribers. MVNOs distribution per country and market segment Europe presents different business models per country. Germany that has the higher MVNO penetration. Source: Accenture analysis (Nov 2007) MVNO Subscriber Forecast Western Europe: 13m subscribers in 2005.

etc). Mobile Penetration in Europe and Greece Source: SATPE MVNO Page 39 of 110 . as well as cover the subscriber acquisition cost (SAC).MNOs may sell their network extra bandwidth. .The MVNOs profit margins (by buying bulk) may aid financially both the MNOs network deployment investments (UMTS.Source: FirstPartner MVNOs do not pose a treat MNOs . thus increasing their market share through the MVNOs (selling air-time in bulk).

151 MVNOs Portugal. Belgium. Spain. Slovenia.6.1 Fixed telephony MVNOs in Europe MVNO Page 40 of 110 . France. Poland MVNOs in Europe have reached different maturity levels and are concentrated in northern Europe Source: Accenture analysis (Nov 2007) 3. UK Austria. Iceland. Germany. The Netherlands. Liechtenstein. Estonia. Norway. Lithuania. Finland. Greece. Denmark.6 MVNO Adoption in Europe . Luxembourg. Italy. Sweden. Latvia. Switzerland.3.

very few successes MVNO Page 41 of 110 .3.2 MVNO/MNO European Market share Source: Accenture analysis (Nov 2007) 3.6.6.3 MVNOs in Europe: numerous initiatives.

Frog .Small description The new prepaid mobile telephony offers very cheap rates. CALL DIVERT.7 MVNO Adoption in Greece There are four Larger and a few small MVNOs. MMS. CALL LINE IDENTIFICATION.AB mobile .Olympiakos .3. CALL BARRING. CALL LINE IDENTIFICATION RESTRICTION.MoMAD Some Smaller .Ciao (needs of an ethnic group) Powered by WIND -Q . EMERGENCY SERVICES.1 The MVNOs in Greece 4 Larger Powered by Cosmote .Services: SMS.Carrefour Frog Mobile . such as: • very low rates from the first second • very cheap SMS from the first message • very cheap MMS from the first message . 3. ROAMING MVNO Page 42 of 110 . MISSED CALL NOTIFICATION.Coverage (the best in the country) .7.

MMS. MO Portal.542.Small description This mobile offering targets certain ethnic group by providing: • Very cheap rates towards all mobile and fixed destinations in Greece • Cheaper rates for calls towards Greece.04 27. Daily SMS. SMS. Roaming.Coverage (Country-wide coverage) .683 Market Share (%) 40.050 Market Share (%) 53.835.Coverage (Country-wide coverage) . music charts. WAP. 3.11 Source: Companies Announcements MVNO Page 43 of 110 .776 Hellas Total 17.000 256. who-called.Small description The dynamic prepaid mobile telephony offers very cheap rates. MAD programme. Music news. Albania and Italy • Cheaper rates for calls towards CIAO numbers • very cheap SMS (same price for Greece and abroad) . MyQ services Mo-MAD .Services: Cheap bundle of voice and SMS towards mobiles of a certain foreign network. such as • per second charging (from the first second) • very cheap national calls • Cheap rates towards 25 European destinations • very cheap SMS • very cheap MMS • no monthly fees .920.412 82.00 32. SMS.Services: Basic mobile services. MMS. e-mail.67 11.000 Wind 4. Value Added Services. Voice Portals. Happenings.Ciao .Coverage (the best in the country) .96 New Connections (Q2) 392. Java Games.638 731. Roaming.2 Mobile Network Operators customer base (June 2008) Total Connections Cosmote 6. MAD MMS news. USA. Ringtones. Roaming Q .22 35.298.7.Small description A pioneering prepaid offering targeting • Youth • music lovers offering unique services in the music and showbiz areas with • very cheap SMS • very cheap MMS .907 Vodafone 5.Services: Ring Me now.

000 32.000.907 40.7.78 3% Low Cost Community MVNO Type Total Market Share on total Subscriptions subscriptions (%) 6.2 € 22 € 19.4 MNOs ARPU and AMOU Cosmote Vodafone Wind Hellas ARPU 24.920.96 5.395 billion minutes and the customer base was 5.9 € AMOU 183 Minutes 144 Minutes * 125.542.298.542 Million.7.835.000 4% 35.000 17.4 Minutes Data refers to Q1 of 2008 * Figure results from data provided by Vodafone for the period April-June 2008.2% 5.000 0.000 519.3. according to which the total traffic in this network was 2.00 692.776 1.3 MVNO Figures MVNOs Cosmote FROG CIAO Vodafone OLYMPIAKOS CARREFOUR Wind Hellas Q MoMAD AB Σύνολο Low Cost Life Style Low Cost Community Low Cost 4. Source: Weekly Telecom Magazine (Companies Announcements) MVNO Page 44 of 110 .04 3.683 27.

customer service functions or content to attract new customers who would not necessarily be attracted to the existing Host Operator. exploit factors such as a superior brand. The model can be used by cellular operators seeking to expand their geographic reach as well as by brands which are sufficiently strong to leverage consumer loyalty across markets (e. the host operator is satisfied to sell unused capacity. an MVNO could literally use the host mobile network for only radio and switching infrastructure. but is not interested helping the MVNO differentiates itself. Everything considered equal.. MVNOs offer a way of addressing areas of the market which would not be reached by Host Operators as well as providing innovative services. outsourcing everything else to the MVNE. therefore. High "chum" rates (customers charging operators) is just one indication of a market where customers have little loyalty to their operator. branding and marketing expertise. there are three main categories of MVNEs. the UK supermarket chain Sainsbury’s has become an MVNO offering a branded cellular service to its customers). The concept also appeals to operators with fixed capacity as offering the opportunity to offer a combined fixed and cellular service with one tariff and one bill and discounted rates to customers who subscribe to both services. For the MNO For Host Operators.1 Advantages/ Benefits For the MVNO model Significantly reduced time-to-market for launching MVNO service Accelerated ROI and reduced TCO for both MVNO and Wireless Carriers launching a branded wireless service Faster time-to-market with new products and services Accelerated ability to launch new campaign and promotions Fast-track release process designed to accelerate time-to-market for enhancements Accelerated integration of additional partners and applications due to a highly flexible serviceoriented architecture Host Operators have traditionally struggled in understanding what their customers want. using established companies as MVNO may be a profitable way of exploiting the knowledge of others. Given the importance of such multimedia services to the future of the cellular market. the MVNO is afforded the opportunity to customize its offerings arguably further than an MVNO that is totally reliant on the host mobile network operator. which could cannibalize host carrier customers. MVNOs offer the possibility that traffic on their network will be increased as they offer capacity on a wholesale basis. At the same time. According to Pyramid Research. An MVNO can.4. Host Operators have also generally proved poor at understanding what content will attract new subscribers. For the MVNE The benefit that the MVNE can provide to the MVNO is deferral of capital expenditures and/or cost reductions while allowing the MVNO to focus on the customer relationships rather than operations. Given the importance of recouping high investment costs this is an increasingly important consideration.g. MVNO/ MNO/ MVNE Benefits and Drawbacks 4. according to their MVNO solutions: MVNO Page 45 of 110 . With an MVNE.

they choose to won more of their platforms. as a largely unregulated area of the market. • Aggregator MVNEs with their own platforms: this includes aggregators which have developed one or more back-office solutions internally. . data platforms and billing solutions.2 Disadvantages/ Drawbacks For the MVNO model Despite the positive features outlined above. . a critical prerequisite to success that the Host Operator is convinced that the selling power of the MVNO name can be used to increase the number of customers on the Host Operator’s network by attracting new subscribers that the Host Operator would not have been likely to attract or by churning customers away from other networks. operationally "light" MVNOs of today have generally worked with an aggregator MVNE that managed the limited back-end operations on behalf of the MVNO. Besides leveraging their own existing assets. For the MNO .MVNOs must also develop intelligent billing systems which can accurately charge subscribers and also split complex financial transactions between the MVNO itself. but they tend to opt for specialised ones with bestof-breed solutions and a strong reputation. . They are not solely focused on the MVNO market. therefore. They still work with MVNEs. . These promote their ability to quickly provide orderto-cash solutions to MVNOs.There are also clear and understandable security concerns regarding giving an outsider access to the operator’s most important and expensive asset. its core network.The greater degree to which the MVNO relies on the Host Operator for these services the lesser the possibility for service differentiation to diminish as the MVNO increasingly resembles the operator whose network it uses. and have complemented them with partnerships to provide end-to-end enablement services. . . distribution and customer care systems. the Host Operator and any third-party content provider. The new breed high-end. strong brand MVNO is transforming the dynamics of the MVNE market.MVNOs.The most significant problem is the basic conflict which Host Operators face. • Specialised Enablers: these offer only parts of the back-office network such as messaging platforms. Some have found that providing even a "virtual" network is prohibitive. The voice-centric.Costs of equipment are high and may make the project uneconomical given that volume discounts may not be available to new entrants. will have all the benefits of being an operator without any balancing licensing obligations. particularly their logistics.MVNOs themselves face significant problems in constructing a coherent business case. there are a number of recurring issues which have led many to conclude that this model has significant flaws. It is. that by permitting access to their network they are permitting the creation of a competitor which will lead to a reduction in their subscriber base. . 4.• Aggregator MVNEs: these offer consulting and integration services and have bundled all of the back-office network components through alliances. MVNO Page 46 of 110 .There is the fear that permitting MVNO "first mover" advantage in the provision of lucrative data services will mean the Host Operator will become a "dumb pipe" starved of these extra revenues.

In case of disagreement in the future.For the MVNE . in-sourcing of operations by the MVNO may cost dearly Advantages and disadvantages of Discount MVNO revealed in the value chain MVNO Page 47 of 110 .The MVNO feels that they are dependent on an external party .

2 MVNE Uses in Europe The degree to which an MVNO will outsource its operational activities depends on what its existing revenue streams are.2.2. MNO having to integrate with all of them! • The US the market is about MNO and MVNE relationships o MVNEs in the United States provide at a minimum the basic connectivity and infrastructure that allows an MVNO to launch a service o The MVNE lets the MVNO to concentrate on their core competency –marketing to a targeted customer segment o MVNE services range from the barebones cookie-cutter model to an elaborate menu of countless options • Less fragmentation = smoother integration o MNO retains control of network integration 4. The MVNE solution appears very much to be ‘pick and mix’ with MVNOs being able to choose the different elements depending on their own in-house capabilities. application hosting. making MNO/ MVNO integration more difficult o MVNO having to deal with many partners. many companies have since adopted the MVNE solution o Resulting in fragmented market o Many MVNEs no longer have airtime agreements with the MNOs -MVNO left to organise this themselves o Only providing part of the solution. provisioning etc • However.1 MVNE trends Europe vs. MVNO Page 48 of 110 . US • In Europe MVNEs initially provided turnkey solutions o The “middlemen” -between MNO and MVNO– o Providing airtime as well as billing.4. customer care.

• Typically MVNE customers are brand owners with little or no telecoms experience • Wants to outsource rather than operate the MVNO in-house • The MNO deals with the MVNE. So regarding: Cost: Start-up expense should be limited so funding can be used for brand development–Incremental costs for capacity increases Quality: • Support systems should be scalable without lengthy delays to avoid service issues • Consistent user experience during the upgrade process should be available • Long-term high volume capability should be ensured MVNO Page 49 of 110 .3 MVNO-MVNE-MNO Functional Model MVNOs need to control back office costs without sacrificing quality. who in turn runs most of the MVNO operation • The key issue is the customer perception • Customer only sees the MVNO brand.2. not the operational workings behind the scenes 4.

ARPU. It is believed that most other MVNOs are at the loss-making to slightly above break-even level. MVNO service revenue has been expanding in line with the growth of virtual operator subscriber bases. the future of the aggregator MVNE becomes somewhat doubtful. by contrast. the MVNO space is dominated by a small number of large. MVNOs have to improve one or more of the following wireless operating metrics in order to make money: CPGA (cost per gross acquisition).com it was found that the MVNO model is a lot less financially attractive than the hype would suggest. niche MVNOs. MVNOs financial attractiveness Based on an analysis by www. If the MVNO segment moves towards a fragmented marketplace with dozens of players serving small niche segments.Reference: 4.2. in both the MVNO and MVNE spaces. Available MVNO data certainly provides enough fodder to question the MVNO model. at least in its initial iterations. and churn. with the MVNO model going through a number of iterations. concerns about overcapacity and potential consolidation are emerging.4 Viability of Virtual Mobile Players Overview The mobile virtual network operator (MVNO) model has gained popularity over the past years. If. Today. MVNO Page 50 of 110 . but is arguable whether this is enough to sustain the MVNO business model. Virgin-like players. MVNEs will benefit of such an expansion. more ventures have followed in Virgin’s path (the model’s pioneer). The future of MVNEs The future of the aggregator MVNE hinges on the development of small. Virgin Mobile UK is profitable (more of an exception than a rule) but the company has been in operation since 1999.wimax-industry. CCPU (cash cost per user).

and c) Companies originating from inside the ICT industry. sectors and parts of the market with just one brand. whilst minimising any association with the "follower" values. This is not compatible with trying to own all areas.2. most mobile operators' brands are all over this matrix.5 Sustainability Sustainability of the MVNO business models will depend on where the company setting up the MVNO business. Because of this. originates from. the brand identity type classification may look as follows: Follower 1) Frog Mobile as: o they are housed by an MNO (operational from the past) o Compete on price o They don’t have a competitive advantage o They don’t have a clear product differentiation MVNO Page 51 of 110 . Note that successful MVNOs. but not as a telecommunication network operator.2.4. b) Companies originating from inside the traditional telecommunication industry. given that the companies are grouped into three types: a) Companies originating from outside the Information and Communication Technology (ICT) Industry. 4. as most mobile operators do today. Regarding the Greek MVNO market. like Virgin Mobile started as a challenger and are now becoming brand leaders. The three groups are called Retailer.6 Brand identity in Mobile Services For a brand to have any value it must mean something to the customer and to do so it needs to be exclusive. Expander and Integrator respectively.

o 2) Q Prepay o o Brand is not distinguishable from competition Lives on the legacy of Q-Telecom Competes on price or promotion 3) AB Prepay o Not premium competitive advantage o Not clearly defined customer base o Unclear product differentiation 4) Carrefour Prepay o Not premium competitive advantage o Not clearly defined customer base o Unclear product differentiation Challenger 1) Ciao mobile as: o targets a gap in the market (needs of a specific ethnic group) o strategy focused on customer needs 2) Mo-MAD o Targets a gap in the market (music funs mobile services needs) o Identifiable brand (MTV) o Well defined customer base 3) Olympiakos Prepay o Targets a gap in the market (football funs mobile services needs) o Identifiable brand (Olympiakos) o Well defined customer base 4. In the United Kingdom. European cellular companies that were unsuccessful in acquiring 3G licences and require a pan-European network are attracted to the concept as a costeffective way of filling gaps in coverage. Some corporations already active in other areas of the telecoms sector are attracted to the model. some established fixed line and broadband network operators are using the concept to offer customers bundled cellular services.2. An example of this was seen in Sweden where the incumbent 2G operator Telia concluded an agreement in January 2001 with Swedish 3G Swedish licence holder Tele2 AB in order to access this new market. which usually have not been used previously in the cellular area. In particular. MVNO Page 52 of 110 . anyone that can offer innovative services and appeal to different demographic sections to target niche sectors and tailor services should be attracted to this market.7 Type of Companies attracted to the MVNO Model MVNOs are attractive to companies with strong brands.

Market segment .Critical mass in expertise & skills .Lower upfront and operating costs and investments Multi-country access MVNE positioning MVNO Page 53 of 110 .MNO focus on its core branded offer Screen opportunities .2.Risk reduction 4.8 VALUE TO MNO Complexity reduction .Differentiated services 4.Specific traffic usage .MVNO candidate education Refinement of project to adapt MNO objectives .2.Time-to-market .10 VALUE TO MVNO Operational MVNE Platform and team .Innovation & differentiated services .On the shelves technologies and services Financial advantages .Business development .2.4.Economies of scale .Mutualisation of investment between MVNOs customers .Distribution channels .Easy start .9 VALUE TO MNO & MVNO .Agreements with GSM operators .« Plug & play » interconnection .Field trial with light integration work for MNO .Outsourcing of MVNO business and technical operational management .

as illustrated in Figure 1. The growth in MVNOs has also created the opportunity for MVNEs. There are three emerging and commonly accepted operating models: the Reseller. the Service Operator and the Full MVNO.2. MVNO Page 54 of 110 . to act as an interface between a Reseller or Service Operator and a host MNO.11 Different approaches to mobile services The Full MVNO model suits businesses that aim to engage fully in the telecommunications industry. as it conventionally covers a range of different business approaches to providing mobile services.4. “MVNO” is a potentially confusing term. to offer leading edge services and to create and capture new markets.

However. shown in Figure 2. • The Full MVNO suits players aiming to achieve additional differentiation from Service Operators and MNOs. MVNO Page 55 of 110 . • However. This is because the control provided by the Full MVNO model may offer better short term and long term opportunities. pricing and promotion to the market. This would mean implementing service offerings within the host MNOs infrastructure but with differentiated billing. procure and implement the underlying solutions. Typically this means no-frills voice and messaging services. by differentiating themselves from other players in those segments through innovation in pricing or service content or both. business models. need to be weighed against the issues of operator acceptance and infrastructure complexity. For example. source. by adopting the Full MVNO model. both in terms of pricing and service innovation. negating the clear advantage of flexibility. The Full MVNO would be in full control to ensure timely introduction of services. responsiveness and speed.Choosing the right approach The choice of MVNO operating model is complex. • The Service Operator model suits those organizations that wish to gain control over the services they provide. the MVNO would have full control of services decisions. Such projects can easily take more than a year. The benefits. Acting as a Reseller or Service Operator would often mean persuading the host MNO to plan. with campaign pricing to kick-start the take-up of services. the various MVNO operating models fit with the MVNO business models as follows: The Reseller model suits an organization that can leverage its existing distribution channels to sell mobile services. Generally. and also achieve a high degree of independence at the outset. by offering leading edge products and services. the Full MVNO model may be the best approach for some players who would otherwise select the Reseller or Service Operator models and introduce differentiating services into their offering at a later date. push-to-talk and other value added services. an MVNO may want to introduce an innovative bundle of video call. delivery models (for example hosted services) and the project’s timelines. but has little need to innovate in the services it provides or differentiate itself from other players. This means the Service Operator model suits players that seek to address specific customer segments.

The Full MVNO may also reduce complexity in the MNOs wholesale interface. there are a number of decisions and processes that are unique to the MVNO and MVNE. that the products and services reflect the brand’s core values While service offering goes a long way towards determining the appropriate MVNO model and the required investment in infrastructure. 4. because the Full MVNO simply requires access to the RAN and handles all other service aspects. the gradual expansion towards a service oriented model focusing on service differentiation and segmentation is being driven by: Market saturation Increased end-user and network competition A focus on customer differentiation and customer loyalty 3G service opportunities and new wireless access technologies The separation of access and services Regulatory pressure The value of service bundles in strengthening competitiveness and dealing with competitive elements As a result. provisioning. Effective planning is built on a solid understanding of the commercial or consumer mobile telecommunications market and is essential to determine both the service offering and the appropriate operating model.12 Execution & Fulfilment Launching an MVNO or MVNE involves many of the practices and processes required to implement any new business: business planning. because they own their customers and can switch networks. Although this may be a potential barrier from the host MNOs perspective. a service provider can adapt to market changes and obtain a competitive edge. including billing. designing business and technology systems. In addition to the advantages of the Full MVNO model already discussed. There is a gradual evolution towards the Full MVNO model by both existing and new third-party mobile service providers.As a Full MVNO. for an existing brand. This approach may also allow the host MNO to concentrate on developing its core brand value. customer support. Full MVNOs are likely to play an increasingly important role in providing mobile services across several markets. This section provides an overview of these items. and then managing it for growth. number portability management and regulatory requirements help to MVNO Page 56 of 110 . service and delivery. Planning the service offering typically involves: Definition of the target market Selection of appropriate services and service charges for the target market Ensuring. it is balanced by significant advantages to the host MNO. Another key advantage of the Full MVNO model for Resellers and Service Operators is the leverage they gain in negotiating wholesale rates.13 Business Planning Good planning is essential for an MVNO or MVNE. the level of knowledge and experience within the telecommunications industry must also be considered. without diluting it with multiple service offerings. interconnection management. 4. More customers may allow the host MNO to make more efficient use of its Radio Access Network (RAN). However. assurance. through the additional wholesale volumes. implementing the business. in a way that a Reseller or Service Operator would not achieve. Issues such as service delivery and Quality of Service.2. confirming the viability of the plan.2.

This may involve engineering existing content for mobile.2.14 Business Design Once the business plan has been validated and the go-ahead approved. Gross life-time value should take into account only the value of the offer. as well as richer communications services such as Push-to-talk Over Cellular (PoC) / push-to-X.15 Business Infrastructure The business infrastructure that any MVNO or MVNE will need to design includes: Host MNO selection – A host MNO must be located and contracts drawn up to cover commercial and technical aspects. its targeted segments. and list current competitive benchmarks from major carriers/competitors (both MNOs and MVNOs). 4. Mobile phones – Suppliers of mobile phones will need to be found. it is simply the incremental value of the offer. sourcing existing content from a developer or content aggregator. Streaming video. Instant Messaging. estimate the potential market size for the offer. handset provision and servicing.determine how much of the Full MVNO model should be adopted. Targeted pricing plan steps 1. calculate gross and net subscriber life-time value. Presence and more. it is prudent to make a decision about how the infrastructure will be managed. including retail outlets. First describe each offer. management of the customer lifecycle. cannibalization levels. Ongoing management of this relationship is vital. Technical Infrastructure The technical infrastructure must be identified. Finally. A Services portfolio may consist of SMS and MMS services. entirely in-house. and retention gains. While these issues need to be considered by a prospective MVNO they are clearly fundamental for an MVNE. the supporting business and technology systems can be designed and the detailed implementation can be created. either direct from the manufacturer or using an established distributor. 3. 4. Value added services – A service-focused MVNO will need to select service platforms and end-toend solutions for creating a differentiated portfolio of end-user services. while net life-time value discounts the value lost due to cannibalization of existing plans. In addition. Location Based Services. or locating a developer or designer to create bespoke content. in-house but using a managed service. 2. Next. Core business systems – As well as standard accounting and operational business systems. or purchased as a service from an MVNE. 4.2. At the end of this process the business should know what to offer customers and the infrastructure that is needed. out-sourced but owned by the business. In the case of offers that are add-ons to existing plans. Mobile TV. including: Core network systems Service delivery platforms MVNO Page 57 of 110 . sources for this content and download platforms must be found. and the marketing of new services and offerings. Email. Mobile Blogging. It may also include systems to manage downloads and billing. Content services – Where end-user services involve content delivery. Also conduct a sensitivity analysis of net life-time value (LTV) to different price points. Add justification for the offer by identifying a unique value proposition for the targeted segment. an MVNO or MVNE will need to manage customer facing logistics.

2. interconnection and performance testing Data conversion from existing systems Delivery system content population Live deployment and switch-over 4. maintaining a fresh catalogue for content based services • New services definition and deployment. fixed and hybrid customers in 150 countries. for on-site management of infrastructure components Mobility Hosting. maintaining intelligence on market competitors • New technology analysis. as well as firmware and software maintenance Performance monitoring.Customer relationship management Systems (CRM) Billing systems Customer care systems Network management These systems must be interfaced with the host MNOs infrastructure. The key Nokia Siemens Networks products and services include: • • • • • • Mobile services. Nokia Siemens Networks’ world-leading experience in all areas of the mobile industry offers a low risk approach. other networks and service operators. The critical activities will include: Service specification and testing Interface development and testing Hardware and software procurement and installation Hardware and software integration System. integration. including both physical maintenance and repair. an implementation plan can be devised and executed. Implementation Once the business and technical infrastructure has been defined.16 Production Support Production support includes day-today operational activities such as: Hardware maintenance. processes and procedures are required to monitor marketplace performance to ensure existing services remain competitive and new ones are developed. These activities might include: • Competitive analysis. for business and technical planning. As a supplier to more than 600 mobile. interoperability. legal interception. In addition. innovative and proven solutions for value added services Infrastructure hardware. interconnection with other networks and roaming arrangements. flexible and pre-integrated solutions with advanced and rich connectivity to support interfaces to all networks for MNO and MVNO voice and data services Consulting services. to ensure that the appropriate quality of service is being provided Load balancing and other activities to maintain quality of service and optimize use of the infrastructure. as well as common support systems. maintaining intelligence on emerging technologies • New content acquisition. retiring old services and ensuring customer migration to new services Finding the right business partner can be the key to success for an MVNO or MVNE. design and implementation Page 58 of 110 MVNO . such as a number portability platform. Nokia Siemens Networks is in a unique position to offer support. identifying and implementing new services for the target market • Service retirement. for full off-site hosted service of applications and infrastructure Convergent online charging. for service delivery platforms and core network infrastructure Managed Services. billing and care.

17 Conclusion As traditional MNOs concentrate on optimizing their Radio Access Network usage and delivering mass market systems. billing. infrastructure. device and mobile computing configuration management Nokia Siemens Networks’ experience in helping businesses deliver successful mobile products and services to consumers worldwide allows it to: • Enable fast time to market – Nokia Siemens Networks and its strong. In choosing an infrastructure partner. the ability to terminate calls. Low OPEX and CAPEX services improve the MVNO’s ability to properly manage its business case.• Terminal. the scope for MVNOs and MVNEs is increasing. and close control over the service. MVNO Page 59 of 110 . regardless of the underlying service offering. allow Nokia Siemens Networks to ensure the delivery of optimum solutions • Reduce risk – Nokia Siemens Networks’ years of industry experience means much lower risk. any player must create the right mix of products and services. an MVNO or MVNE needs to consider the depth and breadth of mobile telecommunications skills that their partner brings to the venture. To be successful as an MVNO. with compound annual growth rates of between 8% and 20%. With full ownership of the customer. a Full MVNO offers the greatest flexibility in going-to-market and then sustaining long term growth. The ability to call on business and technical expertise from any discipline within the infrastructure domain helps to avoid roadblocks. proven partners ease the operational challenges and provide quick deployment Remove complexity – Marketleading offerings and experience across mobile software platforms. • Build success through strong collaboration – Nokia Siemens Networks build long lasting collaboration with its customers and invests to ensure success for both parties.2. coupled with familiarity with all the components within the MVNO/ MVNE operation. and support it with the correct infrastructure. systems integration and solutions. the Full MVNO operating model offers compelling advantages. While many businesses will be served well by implementing Reseller and Service Operators MVNO models. Ovum estimated in 2005 that by 2009 around 10% of all mobile subscribers could be served by an MVNO. 4.

Product-Driven Strategies – MVNOs can help mobile operators target customers with specialised service requirements and get to customer niches that mobile operators cannot get to.Network Utilisation-Driven Strategies – Many mobile operators have capacity. marketing).18 MNO Motivations (to host MVNOs) There are three primary motivations for mobile operators to allow MVNOs on their networks.2. The opportunity for mobile operators to take advantage of MVNOs generally outweighs the competitive threat 4.Future Outlook B u s i n e s s P o t e n ti a l - Value Seekers A2P2A is mass application Followers Value added services Powerful competing technologies Early Adopters Real-time processing Touch-point Integration 2004 2006 2008 2010 Reference: Mobile Economy 4.2. An MVNO strategy can generate economies of scale for better network utilisation. whether alone or with partners and they can help attack specific. help fight churn. customer service. product and segment needs – especially in new areas like 3G. targeted segments. sales. These are generally: . . . MVNOs are a way to implement a more specific marketing mix. MVNO models mean lower operational costs for mobile operators (billing. grow average revenue per user by providing new applications and tariff plans and also can help with difficult issues like how to deal with fixed-mobile convergence by allowing MVNOs to try out more experimental projects and applications.Segmentation-Driven Strategies – mobile operators often find it difficult to succeed in all customer segments.19 - Host MNO Benefits Sell unused 3G network capacity through more than 1 MVNO Increase non-SMS Data ARPU Wholesale more profitable than retail customers if MVNO marketing more cost-efficient Enter All-over-IP market with zero risk for MNO brand and core Voice/SMS business Page 60 of 110 MVNO .

VoIP – all applications.60% : MVNO/MVNE .2.22 The MNO Perspective Reaching more segments. MVNO Page 61 of 110 .- Inexpensive international data roaming for M(V)NO subs thanks to Multi-IMSI solution Preferred network for international OPEN visitors thanks to Multi-IMSI solution 4.2. extracting attractive subscriber economics and stimulating mobile data take-up and usage are four major drivers behind the push by Mobile Network Operators (MNOs) to embrace MVNOs.2.20 - Host MNO Requirements Direct connectivity to OPEN MVNO/MVNE All-over-IP incl. no packet filtering Revenue Sharing: MNO . open ports. expanding share through non-traditional channels.40% Competitive data wholesale pricing Target GB retail pricing: 10-15 Euro MVNO/MVNE with HLR and own IMSI range in each country No upfront interconnection payment 4.21 Host MNO Wholesale Business Potential (Example) Even the biggest MNO in Germany could benefit from selling data capacity to OPEN or other MVNOs if customer churn (in and out) was proportional to market share 4.

g. MVNOs can usually do a better job than MNOs in stimulating usage of mobile data because they can offer focused mobile data content and applications to target customer segments. teenagers. investors may also view MVNOs as complementing their other businesses by adding value to existing offers and leveraging existing assets.First. 4. unified messaging and home surveillance through a mobile device. MVNO Page 62 of 110 . the MNO runs a good chance of doing better with wholesale in the long-run. Cable providers have the potential to upsell the quadruple play with integrated services such as Wi-Fi coverage at home. First. if the MVNO partnership lets it acquire more net customers (after cannibalization) than it would have captured independently.23 The MVNO Perspective New growth opportunities. benefits to core businesses. Such segments do not receive much direct attention from MNOs’ typically mass-market product development. university students) with a unique and targeted value proposition. in some cases the wholesale and retail subscriber lifetime values of segmented offers are not very different from each other. ethnic minorities.2. MVNOs provide operators with a means to directly reach out to specific segments (e. MVNOs are an opportunity to boost core businesses by stimulating brand loyalty and enabling cross-marketing for other products and services. While retail generally guarantees a superior lifetime value. wireless continues to be a very strong growth business. Third. marketing and distribution strategies. religion minorities. MVNOs may also provide MNOs with access to potential customers via non-traditional channels such as cable operators and alternative retail stores. Third. Finally. MVNOs’ utilization of non-traditional retail channels may contribute to attractive subscriber economics. Finally. applicability of existing relevant assets and attractive economics are among the factors encouraging private labels to consider MVNOs. an MVNO that combines a clear target segment and focused offer with a unique value proposition can yield attractive subscriber economics. services tailored to niche segments may hold the key to the still-elusive goal of making mobile data more “sticky” with consumers. As seen in Figure 1 (page 4). Second. Second. for some companies.

Wholesale Value and MVNO Value for Different Customer Segments Sample HNO Evaluation Criteria for potential MVNOs: o Large own customer base o Strong distribution network o Strong market position o Low tariff intentions o Niche market segment o Economic strength o Mobile competence o International reciprocity o Georgaphic submarkets o Intial Public offering MVNO Page 63 of 110 .Example from the US MNO Retail vs.

25 MVNOs positioning Different range of MVNO’s exist from the light offer provider to the full MVNO: MVNO Page 64 of 110 .2.2.24 MVNOs rationales There are 4 rationales for the launch of an MVNO offer 4.4.

The enhanced service provider model is the most prevalent in Europe because it allows focusing on the product offering and the client relationship: Four main differentiation strategies have generally been adopted by European MVNOs: MVNO Page 65 of 110 .

although some markets have fallen into aggressive price wars.MVNOs seldom lower their prices by more than 10 to 15% compared to MNOs. MVNO Page 66 of 110 .Communication examples (2004) .Most MVNO communicate on low prices and value for money: .Price/ minute comparison (2004) .

mobile advertising services and PC to mobile convergence can lead to fast adoption of VAS that will stimulate non-voice revenues. MVNO Page 67 of 110 . including emerging markets. Loyalty schemes: targeted promotions and loyalty programmes are playing an important role in managing churn and also in migrating users from prepay to contract. In addition. Value Added Services: as voice revenues remain under pressure. In highly penetrated markets. operators are facing many challenges that can have a direct impact on profitability.Evolution prepaid prices from the introduction of MVNOs Mobile operators' key challenges (Source: OECD. Amongst the key competitive factors that can stimulate revenues are: • • • • • • Prices: changing price elasticity can provide the right balance between volumes (voice and data) and price erosion as sudden price drops can lead to a drop in revenue. fixed-mobile substitution and innovative tariffs such as flat rates. Considering the level of maturity in the region. Quality of service: QOS is playing an important role in customer retention. some operators have set up shared network ownership arrangements to reduce their cost structure. Rationalising the portfolio of voice and data services with such price competition has led to widespread large bundled deals. data usage is showing strong organic growth and also acts as a key differentiator amongst operators. Wireless Intelligence. 2008) In this very competitive market environment. Partnerships with content providers. Network coverage: expanding high-speed network coverage nationwide can accelerate the adoption of mobile broadband and other high-speed data services. main operator groups can stimulate revenues by leveraging international economies of scale and synergies with their operations in other markets. consolidation in Western Europe is another topic that can also be expected to have an impact on revenue growth. MVNOs: maintaining market share through market segmentation where MNVO development is key.

4.26 Key challenges faced by MVNOs .2.MVNO must display a light cost structure to deal with operators price per minutes MVNO Page 68 of 110 .

MVNO Page 69 of 110 .

5. The MARKET structure & opportunities 5.3 MVNO market drivers • • • • Segmentation Regulations Competitive intensity Heavy 3G investments 5.4 MVNO market structure MVNO Page 70 of 110 .

5 Market size Ovum estimated in 2005 that by 2009 around 10% of all mobile subscribers could be served by an MVNO. the Full MVNO operating model offers compelling advantages. a Full MVNO offers the greatest flexibility in going-to-market and then sustaining long term growth. with compound annual growth rates of between 8% and 20%. While many businesses will be served well by implementing Reseller and Service Operators MVNO models.7 Aggregation business model benefits MVNO Page 71 of 110 . 5. the ability to terminate calls.5. and close control over the service. With full ownership of the customer. regardless of the underlying service offering.6 MVNE value 5.

8 Key Requirements Deep understanding of the of MVNO market and MNOs concerns and strategy to gain trust Value added services delivering capability SIM Cards Voice mails Convergent services Mediation Billing (postpaid + Prepaid) + CRM Account management and marketing support capabilities Small MVNOs not always easy o deal with Small MVNOs need marketing supports 5.9 Competition is intensifying –mobile premiums decrease MVNO Page 72 of 110 .5.

MVNO Page 73 of 110 .

5.10 Local scale is key to achieving EBITDA margin ambitions 5.11 Operators need to adjust MVNO Page 74 of 110 .

we have the following: Three possible models Low cost garage provider Co-branding with well-known product in any line of business (i. Clothes. These are distinct from domestic MVNO agreements and are intended to provide transparency of international tariffs Looking at the Market Strategies from a different view. Advertising-funded MVNOs like Blyk or MOSH Mobile build revenues from advertising to give a set amount of free voice.13 Marketing strategies Discount or Low-Cost MVNOs: provide cut-price call rates to market segments. Ay Yildiz in Holland or CIAO in Greece One specific sector of MVNO operations focuses on international. Community MVNOs like Turkuaz-Mobile in Germany.) Economies of scale – born global strategy: • Multiple countries • High end technical solution • Best quality product from day one What is the company’s risk profile? Low risk: Low cost provider (low investment) MVNO Page 75 of 110 . cars. Lifestyle MVNOs: like Helio focus on specific niche market demographics. or roaming Mobile Virtual Network Operators (rMVNO).e.12 The challenger strategy must be tailored to the market environment 5. planes etc. text and content to their subscribers.5.

14 Timing The market for online is a slow moving thing Crossing the chasm paradigm Innovators and early adaptors Belgium is only just starting Regulation is in place Customers are getting used to online No or low churn PRICE is important and then easy to use and simplicity Offline distribution cases show that the majority sticks to what is familiar DK shows that it will change over time MVNO Page 76 of 110 .Medium low: Average IT solution without co-branding Medium high: Average IT solution with co-branding High: Born Global without co-branding WEB self-service is the Key Using 100% self service platform integrated with the operator Has all MVNO needed functions and processes for GSM User friendly Standard platform that is further developed 5.

15 Provider Selection criteria 5. so will the availability of niche MVNO applications. One MVNO could provide sports news.16 MVNO Services For now MVNO services have been limited.5. MVNO Page 77 of 110 . in the future a cell phone user may be able to subscribe to a network operator plus multiple MVNOs for specific data services over the same phone. but analysts from EMC Research have predicted that as wireless services grow. For instance. another weather and traffic and still another could provide instant messaging capabilities.

Ethnic minorities represent a source of new. Lyca. In Holland. Therefore. IDT."International Calls &roaming" MVNOs Ethnic MVNO propositions According to research of Piran Partners.Virtual Operators . Ortel and Ay Yildiz. European Ethnic Migrant Population (There are 32 Million people in Diaspora in Europe) Reference: Lycatel Mobile MVNO Page 78 of 110 . high quality mobile phone customers.Internet Based Virtual Operators . Voice Messaging Data Calls Voice Mail International Calls Billing Refills/credit Usually free or next to nothing for on net/ flat rate off-net nationally Very cheap on-net/ Follow the competition for off-net Cheaper than MNOs Cheaper than MNOs Cheaper to certain targeted destinations National Calls: Per second International Calls and Roaming: per minute Availability of a variety of refill cards is a must Provider Types in Europe The types of providers in Europe can be: .MVNE based MVNOs . Chippie. this market segment is represented by Lebara. each MVNO and the network operator could focus on their own niche markets and form customized detailed services that would expand their customer reach and brand. Piran Partners has compared these propositions to other MVNO propositions and reveals that these MVNOs are on average more profitable and deliver quicker results.In this way. more and more MVNO's develop propositions focussing on this segment. much needed in a market so characterised by churn.

Companies to allow MVNO set up (by Sonopia) Sonopia. allows companies a white-label concept whereby companies can launch their own-branded mobile phone service. remote asset management. DATA MVNOs. Applications supported by M2M MVNO’s are many and varied including telemetry. we believe that Data MVNO’s will evolve from a successful niche business into a booming opportunity for vendors and service providers alike. branding. monitoring. MVNO Page 79 of 110 . and Web sites for their new subscribers. It is almost universally agreed that successful MVNO’s will have some combination of scale. Sonopia will rent network space from Verizon Wireless and give the client companies mobile phones. a US based MVNO. and or a particular important niche. and more. billing. some times referred to as Machine-to-Machine or “M2M” MVNO’s facilitate communications between various machines with the help of a wireless network. Sonopia claims that customers can set up a new mobile service in roughly 15 minutes. In a world of expanded M2M communications.

In some cases. a potential MVNO (which usually lacks mobile expertise) has a major challenge in designing the right entry strategy. The last strategy above for setting up a successful MVNO is the one that bundles together mobile with other services.Bundle together premium content or other services Of the three strategies mentioned above. A very feasible MVNO can fail due to an undifferentiated market entry strategy or poor launch execution.Build on a well known brand . photos. even with a strong business case. 6.Establish a price-winning formula . Also most of the bundling experiments in telecom world have been realized for media companies destined primarily for wired/fixed Internet communication channels (e. Some of these companies would like to move up their value chain by creating their own web portals and a few are now being set up by their own MVNOs. particularly from the more aggressive media organizations (e. but it is also the most risky as it has yet to be proven on a large scale. Rupert Murdoch’s empire). Typically these services (e. ADSL) while most mobile operators sell content over their networks over the last years.6. It is always dependent on the type of implementation. There is a feeling among many media companies that the large revenue percentage taken by MNOs is unjustified. They have however viewed cautiously by many operators that see potential competition with a strong brand-based offering.1 Setting-up Strategies Three strategies exist to setting up an MVNO: .g. and developing and executing the launch plan. the market segment for any of the options of strategy has to be selected very carefully.g. the content services may not even be owned by the media company that starts the MVNO. as well. MVNO BUSINESS SETUP The process starts with developing a strong business case and negotiating a viable wholesale agreement.g. However. music. By bundling media content together with voice and data traffic. a media MVNO can avoid price competition and gain significant customer loyalty without the need for extensive marketing of the products. bundling is probably the most attractive to many businesses. video. 6.will FMC players develop or acquire their own cellular infrastructure and what are the pros and cons of the respective approaches within the MVNO environment? Where are the next potential growth markets for MVNO growth? What are the most developed MVNO markets and which will be in the future? What MVNO approaches are sustainable long-term? Page 80 of 110 MVNO .2 Key Issues MVNO players are faced with • • • • • Is the MVNO market sustainable? Is FMC a long-term driver of the MVNO business . etc) can be consumed on a mobile device but there could also be other telecom services such as fixed-line calls or Internet access. Finally. however the bundling option seems to present significant importance.

content providers and many more Evaluate specific business approaches. business.3 Issues per player Operators • • • Evaluate and quantify opportunities in various strategic roles from service provider and partner to competitor Identify threats and ramifications of current market developments and understand their wider strategic impact Anticipate market as it moves forward and formulate strategies to tackle it Potential MVNOs • • • • Evaluate the opportunities and challenges Analyse potential strategic approaches to implementation Assess business models of specific industries including. retailers. analysts and venture capitalists • • Provides unbiased. niche. business service providers. brand owners. including discount.will FMC players develop or acquire their own cellular infrastructure and what are the pros and cons of the respective approaches within the MVNO environment? Where are the next potential growth markets for MVNO growth? What are the most developed MVNO markets and which will be in the future? What MVNO approaches are sustainable long-term? How does an MVNO go about successfully launching in this evolving and challenging market? What type of approach is most likely to succeed and what are the strategies to ensure their success? 6. community orientated and many more Device and component manufacturers • • • Understand the MVNO business proposition from the service provider perspective Identify key players and scope for partnerships Recognise evolving roles and opportunities in the MVNO service provisioning value chain Vendors • • • Understand the MVNE value proposition and platform/software providers role within it Identify opportunities for service provisioning and support Formulate service provisioning strategies for clients based on best-case approaches Consultants.• • • • • • • • • How does an MVNO go about successfully launching in this evolving and challenging market? What type of approach is most likely to succeed and what are the strategies to ensure their success? Is the MVNO market sustainable? Is FMC a long-term driver of the MVNO business . reasoned hard facts free from industry hype Provide clients with clear business intelligence to support recommendations and investment Page 81 of 110 MVNO . 3G only.

specific expertise). Financial institutions: Need to assess the viability of MVNOs and MVNEs to support a decision on whether to finance MVNOs and MVNEs. Vendors: Must assess the MVNE opportunity for a long-term strategic entry (partnerships or acquisitions). and if there is an opportunity beyond application hosting.6. since the benefits of mobile data services may vary greatly by applications area and segment. The MVNO profitability calculations will help benchmarking the MNO performance against MVNOs. It also demands cross-industry partnerships and new business models. and ARPU) will help financial institutions to benchmark such data against existing cases. profitability. functionality and quality will be more important for the MVNO than any mobile technology. Also determination of an optimal strategy to attract MVNOs (end-to-end solutions vs. accompanied by a re-organization of the value chain. determination whether MVNEs will strengthen the MVNO service and increase their profit (could be based on external analysis). is needed. The mobile market is changing from an environment dominated by voice to one where mobile data services are equally as important. CPGA. This is not an easy transition. MVNEs: Need to understand the long-term market potential and MVNO perception of MVNEs.5 Business Case Structure The traditional values of brand. Finally. CCPU. Also benchmarking of costs and profitability against industry averages and other key players is definitely required. Finally. will help. MVNO Page 82 of 110 . Also determine if MVNEs are competitors or complementary. The MVNO profitability calculations (NPV. Finally assessing of key competitors and benchmarking of the MVNE positioning against them. and subscriber forecasts. 6. quantify the long-term equipment and service opportunity in the MVNO space based on revenue. MVNOs: Need to develop a strategy using external help (a consulting firm) with objective long-term analysis of the MVNO market.4 Targets per player Mobile operators: To quantify the long-term revenue potential of the wholesale market to support decisions whether or not to work with MVNOs and MVNEs. as it requires adaptation to new services concepts and new technologies. This is worth bearing in mind.

The final steps are brand and channel development. They will also maximize their return on investment and share holder value. including custom mobile content and user interfaces.6. Next steps include the selection and integration of back-office systems and processes. and the selection of handsets. an MVNO requires a network leasing agreement with one or more MNOs. and the selection and integration of mobile data platforms. 6. The wireless business.6 MVNO Business Guide Few key questions for the business case include: What are the effects or different pricing schemes? Which mobile data services take more capacity? What are the effects of revenues share arrangements? Which mobile data services have the highest contribution? How mobile data services and price plans complement each other? How mobile data services and price plans capture from each other? MVNOs who can proactively address thre questions and manage their revenues and investments in key functional areas will be successful in this competitive market place. setting up an MVNO is a daunting task. from network leasing to channel development. possesses entry barriers and launch risks that are high enough to discourage most outsiders from making the plunge alone.7. Design of an offer. follow. economies of scale and high peak funding are among the major barriers to entry faced by potential MVNOs. which increase in number and complexity as one moves up the different steps of the wireless service delivery chain. 6. Each of these steps is linked with potential obstacles and partnership dependencies that could derail an MVNO’s launch plans. Prospective MVNOs often have little MVNO Page 83 of 110 .1 Barriers Lack of wireless skills and expertise. though potentially lucrative.7 The MVNO Business: High Entry Barriers and Risks Despite the attractiveness of wireless. MVNOs must manage a wide array of responsibilities and relationships. As seen in the figure below.

If the MVNO can demonstrate strategic value to the MNO partner. Launch can be preceded by six to nine months of start-up costs. The first class of risks belongs to the selection of the appropriate partners. MVNOs must identify and form relationships with the relevant distribution partners MVNO Page 84 of 110 . An MVNO’s long-term prospects depend largely on whether the selected MNO places strategic and not only financial value in the MVNO’s target segments and proposed offer. Once in the business.relevant experience to guide them through the different steps of the wireless service delivery chain. and risks related to the execution of the launch. These costs can delay an MVNO’s EBITDA breakeven and require considerable investment (in the range of millions) in peak funding. and the negotiation of partnership terms and conditions.7. as well as content providers and handset OEMs to profitably deliver a differentiated value proposition to their target segments. Finally. Even MVNOs that successfully combine internal resources and partnerships to navigate these challenges and risks will still be disadvantaged to existing players due to economies of scale. including risks associated with the selection of partners. most MVNOs will face a few years in the red before they can break even. MVNOs need scale to negotiate favourable pricing terms on network leases with MNOs and handset contracts with OEMs. MVNOs need to partner with individual backoffice systems/process providers. MVNEs and mobile data platform providers. and post-launch subscriber acquisition costs range from € 65 for a low-end pre-paid offer to over €360 for a high-end post-paid service (based on MNOs current CAC –Customer Acquisition Cost).2 Launch Risks Potential MVNOs also face a number of launch risks. In addition. 6. the MVNO can extract a more favorable deal that is not just based on volume of subscribers.

6. The criteria for success in this MVNE field obviously must include assured capabilities in running a network service business. Execution of launch opens the field for a second class of risks. the role of the MVNE will grow. Outsourcing the complex business of billing and customer care for converged services to an MVNE creates real flexibility for the MVNO. quite often requiring the support of an MVNE. Naturally. This already includes network providers and the branded service businesses that have a direct relationship with a customer. An open relationship with clean demarcations is critical.in order to cost-effectively reach their target segments. MVNOs managing their launch programs have to execute. MVNO Page 85 of 110 . As these proliferate and seek competitive advantage. NextGeneration MVNOs have certainly got the potential to cause even more excitement than they already do. as well as brands evaluating the MVNO model. Managed carefully and integrated successfully. experience and systems are of little good unless the MVNE has worked out how to share risks and responsibilities with its MVNO client and the other third parties involved. MVNEs are becoming an integral part of a maturing converged communications industry. coordinate.8 The future of MVNOs MVNEs are increasingly relieving the pressure that MVNOs continue to experience as they seek to enter markets quickly and effectively. there is a rush of businesses positioning themselves as MVNEs. MVNOs that fail to exhibit a strong execution and program management discipline in the launch phase could end up suffering from long delays or developing a value proposition that is not differentiated enough to attract customers in their target segments. Indeed the very best MVNEs are those that have given their MVNO clients the opportunity to fine tune their service portfolio and be most responsive to changing market conditions or new technologies. keep track of and monitor progress and risks of hundreds of interdependent milestones cross each level of the wireless service delivery chain. Specialist skills. however close collaboration between all players is absolutely essential to success.

9 Implementing an MVNO Understanding the MVNO The MVNO is a business. and as Ruskin said. The low-cost MVNO does not offer the host operator any value. specifically to provide input on whether government intervention is necessary to allow MVNOs to offer services and applications at a lower price to consumers. as the MVNO model cannot support delegation to masses of employees. Those who fall quickest into this trap are existing fixed or other operators. is cautious about regulation surrounding the MVNO model. an MNO can cut prices or launch a budget service whenever it likes. and the MVNO requires a very different skill set than managing a fixed network. fixed or other telecoms models running an MVNO is also vastly different from running an MNO. The whole point of wholesale is the resale of excess capacity. which means having staff that understand the whole end-to-end process of delivering a mobile service and a call. For instance. Mobile and therefore MVNO is vastly different from other wholesale and even other telecoms models. in the DSL world this would be the equivalent of the DSL provider not only providing a DSL line and a wireless modem/router. they are his lawful prey. which paves the way for someone else prepared to offer an even worse service even cheaper. and to completely underestimate the complexity. Mvno and the regulator So far MVNOs have not been regulated in any country.6. There are arguments from both sides as to whether the MVNO model will bring otherwise unreachable revenue or unwelcome competition to the MNOs. not all. Finally. Wholesale mobile is vastly more complex than wholesale DSL. and should never be driven by the network. in that and MNO or MVNO owns and/or manages the very complex and expensive customer equipment (handset and SIM). where you are only generally responsible for part of the end-user process. Selling on cost also only acquires a customer with cost as the only value. The ITU has received several requests to study the issue. This would help to ensure a more efficient use of the spectrum but some incumbent providers argue that the market is already competitive and intervention is not necessary. The only way a low-cost MVNO can offer value to an MNO is if the MVNO takes customers that are so low value that only the MVNO running a much leaner business model could make money from them. but it is equally keen that network operators should not be legally required to open their networks to anyone wanting access. It is also far different from running an MNO. with an MVNO you need a small group of people who understand the whole process and service. Mobile is never to be underestimated. but also the first. the GSM Association. which represents more than 500 GSM operators and key mobile vendors around the world. second and third line support on behalf of the manufacturer. some UMTS MVNO Page 86 of 110 . passwords and the process of the user being able to use anyone else's wireless modem router in the same way as they do at their own home or office. This is obviously a finite market and one which could fin itself in serious problems if and when the operators engage in a price war. expense and overheads required of running a mobile network. A follow-on to the buzz-word "Brand MVNO" loved by those who aimlessly follow trends from the back-seat. this brings us on to the most important fact of understanding wholesale and the MVNO. the model should bring value to both parties and be mutually profitable. to create extra capacity is to completely misunderstand the underlying concepts of Virtual and Wholesale model. It is keen to see legislation that helps companies provide and take advantage of the financial potential of MVNOs. and the host MNO cannot support the MVNO delegating this to its staff. now seems to be the "low-cost MVNO". To successfully pull of an MVNO you need to keep costs to a minimum. as well as the authentication. not a network. At the same time.

gateways. beyond reaching commercial agreements with a host operator in each member state. This is very unwise.Several carriers interconnects (to choose from) . Such regulation only focuses on prices and carriers. benefiting subscriber productivity and increasing the health of the industry. particularly in Germany. having the right to freely move goods and services and even set-up in other EC Member States.Secure routers. and all mobile telephony players. Whilst this is wise on the one hand.High quality connections maintained by the routing and switching teams (own or the MNO’s) .Low costs guaranteed through global carrier agreements Thus international calls should be switched to international destinations via the optimal route Core Network Elements The core network should typically be made up of the following components: .Intelligent networking ensuring reliability & quality MVNO Page 87 of 110 . encourage innovation of new services. It goes without saying that the MVNO requires regulatory assistance and support from these MNOs and indeed even other MVNOs. there are still large. These services include: advanced roaming solutions that will drive roaming costs down The Full MVNO can establish its own roaming agreements and this enhancement will be translated to consumers Global MVNOs can even leverage their footprint and create multiple MVNO agreements in multiple countries - Effect on Consumers and the Way Forward: Regulation on international roaming tariffs will. in the short term. Additionally there is the issue in the EC of an MVNO in one member state. and most certainly a competitor of the other MNOs it did not reach a commercial agreement with. it will slow innovation and decrease the health and longevity of the mobile market. push prices down. Traffic Management International traffic should be managed to ensure that customers get the best possible combination of quality and service: . at the same time. this strategy will benefit all consumers and players in the market. In the long term. service innovation. The universally held view on regulation of the MVNO is that it should be defined by commercial agreements and not regulatory intervention. not the full MVNO model Full MVNOs have the ability to create services and innovate because they own certain core network nodes such as the GMSC and HLR. as whilst the MVNO may reach a mutually beneficial commercial agreement with one MNO. on the other it has also been an excuse for some regulators to wipe their hands of the MVNO and any regulatory issues it may have. carriers accept MVNOs but restrict that agreement to Reseller MVNOs. the MVNO market is still closed in several European countries In other countries. it is still essentially or potentially even a competitor with it. tunnels & IP networks . It is obligatory to consider the processes affecting pricing. practical barriers to this that need addressing and regulatory support. this MVNO will almost certainly have shared important commercial and strategic information with these competing MNOs before reaching an agreement with its chosen host MNO. based on the latest technology . like any other business within one EC member state.International gateway. To boot.licence-holders. however.24 x 7 monitoring helps ensure reliability . are fighting the regulatory authorities for the right to share their spectrum... Regulation for opening the market to competition through full infrastructure MVNOs will definitively reduce roaming and long distance tariffs and.

this concept was heavily promoted both by Mobile Network Operators of the reluctant variety. as there are many ways to differentiate a service via the SIM. things are changing with more competition. more open operating systems. Some of these include Telematics. more intelligent handsets and finally the rise of ODM and OEM handsets that will soon mean an MVNO can potentially design and launch its own handset from a reference design. MVNO and the brand A commonly held misconception of the MVNO is that it was all about the brand. The handset is becoming less and less the huge thorn in the side that it used to be. should mean more to customers than just making calls.- 24x7 Network Operations Centre Mvno and the SIM The SIM is the single most important part of the ownership of the customer. a school or university phone to also form the basis of another MVNO targeting the "parent phone" or be passed on to become the "parent" phone or even follow the customer to become a "work" or "lifestyle" phone. Since then the market has moved on. Apart from not being true. This is an often overlooked element of the MVNO that the MVNO will often try to neglect in preference to just taking the MNO SIM and rebranding it.Give customers the convenience of direct-dial international mobile calling .Ensure all connections are of great quality . This model allows the same phone but a different service to be provided on the same infrastructure.Make sure all relationships are built on trust . differentiated services on the same platform and even the same phone. It is very important for customers to stay in touch & that’s why brand values such as those listed are important in everything an MVNO does: .Always give customers value for money . This is not necessarily wise. Regarding Services.Make products easy-to-use & prices easy to understand .Always be empathetic to the needs of diverse communities MVNO Page 88 of 110 . The SIM buying model of the host MNO is often dictated by different parameters like and driven by issues such as volume and even the fluctuating and expensive nature of silicon at the time most MNOs set-up. However. mainly as the market is no longer dominated to such an extent by those manufacturers who also had a core business in mobile operator infrastructure and maintenance. machine to machine (M2M) and even the vertical telecoms data and voice MVNOs that will shape the market in coming years. Mvno and FMC Fixed-mobile convergence opens up the MVNO market to the numerous potential MVNO models that emerged previously but never reached their potential. maybe in order to discourage the evolution of the MVNO. Mvno and IMS IMS allows an MVNO or even MVNE to provide multiple. with Java SIMS and Java toolkits being much more suitable and flexible for the MVNO and even cards with embedded flash memory on the horizon. for example. This can all be done remotely with IMS or even SIM applications. and most importantly allows customers to move between these differentiated services. This would allow. and the obvious conflicts that arise form the situations that mobile operators form 99+% of these companies' business. MVNO and the handset The handset and the SIM are the key to the success of mobile and are therefore key to the success of the MVNO.

there are few or no people dedicated to fraud and revenue assurance The MVNO may try risky business cases/ scenarios. while the expected revenues most of the times are limited In the case of the MVNO being engaged in post-paid market. credit checking may not be strong enough The above reasons may in turn bring about certain Implications for both the MVNO as well as for the host operator: The subscribers are indirectly MNO subscribers Less revenue for the MVNO means less revenue for the MNO also Depending on the collaboration agreement. a number of actions can be taken to counter this problem. such as: • CDRs available more frequently • Possibility to shut down a line on a 24x7 basis • Fraud Management System tailored to the MVNOs needs • Fraud Management reports Regarding Roaming fraud (case where MVNO core business is offering the roaming service). again for economical reasons. with the risk of MNO losing the MVNO Solutions and recommendations (For Fraud) Regarding domestic fraud. the implementation of the NRTRDE solution.MVNO fraud exposure MVNOs are more vulnerable than an MNO towards fraud since: Due to limited head count (at least initially for cost-cutting reasons). via which: • Send NRTRDE files to MVNOs (IMSI splitting feature) • IMSI provisioning • File Splitting and naming of new files created • Distribution of file to respective Service Provider • Reporting on splitting activity • Fraud Management System tailored to the MVNOs needs • Suspicious Dialed Digits (SDD) • Pattern Matching • Suspect Equipment • High Usage • Premium Rate Service • Mobile Data Evaluation Note: However NRTRDE is mandatory for MNOs. dispute handling sometimes may be unclear. its implementation is expensive (300K €) MVNO Page 89 of 110 .

g. location and interfaces Billing. Reporting issues Software programs and their administration MVNO service package (basic / options) MVNO activation / set-up project All relevant items in the contract to be executed. Invoicing. Customer Care / CRM MVNO life-cycle management Changes and modifications in MVNO portfolio Agreement updates / extensions / phase-out MVNO deregistration / transfer of customer base MVNO Page 90 of 110 .6. e. deployment. both MVNO and HNO side. Systems. site set-up.10 Modeling MVNOs: The Big Picture Areas to be dealt with are: Contract management Following issues are to be covered in the contract management phase: Numbers. Sales and technical support Sales Outlets. SIM card logistics Support. how to be arranged Network Infrastructure. own number space or part of MNO space SIM card production / logistics.

every CDR is pre-rated (to enable fraud detection). as they enable MVNOs to make modifications to rate plans within short timelines. case & queue management. the subscriber bundles and the discount models. Mediation. Self Care The Self Care function (automated customer service) may decrease the amount of calls on the customer care department. Rating & Billing Mediation: is performed to create a general CDR format from different formats (for instance fixed and mobile). vew/download invoices. should be easily integrated in existing call center environments. Page 91 of 110 MVNO . Mediation. Provisioning should allow users to change certain important service settings. So provisioning arranges the link between the telephone number to a SIM (IMSI) and the activation of this combination on the network (IN/HLR). enabling flexible propositions to the market. a credit check must be integrated into the activation process. After a bill is generated. If all CDRs pass the exception rules. Rating: is performed in different steps. detailed customer information including CDRs. Billing After rating an invoice can be generated. they should be stored as non-rated and formatted until a bill-run is performed. it should be send in regular paper format or by e-mail. For postpaid propositions. task management. is enabled to perform their own customer care services (outsourcing of these services is always a possibility). finance management. First. sales management & order tracking. Customer Care Customer care features.Provisioning The provisioning module is one of the key areas that enables activation of users on the network and management of network settings. SIMs can be activated realtime or through customer care. Rating is based on the rate plan. using several threaded parallel bill cycles. In this bill run the final rating of CDRs must be performed. request/track status of number porting. request/track status of SIM swap. Such features may include: • • • • • • • ticketing & progress management. rating & billing is an important process. Using such features the MVNO Customer Care environment. customer automated e-mail interaction. upgrade/change contract. Such a function is usually easily integrated with existing websites and could offer services such as the following: • • • • • change personal details / moving.

MVNE or ISP uses to run its business operations. Additionally. the possibility of offering SMS alerting or sending paper reminders may be adopted. The possibility to fully integrate the distribution of products in the BSS* environment should be investigated. When usage amounts of postpaid customers exceed a specific level. Collections Can be obtained through standard interfaces to third parties who can offer collections services. Business Support System (BSS) A Business Support System (BSS) is a platform that a telephone operator. the system should inform certain users of the system. which could be paid using Credit card payments. Vouchering MVNO Page 92 of 110 . In this way. A credit check can be integrated into the payment process if necessary. The role of Business Support Systems in a service provider is to cover four main areas: o Product Management o Customer Management o Revenue Management E-Commerce An e-commerce functionality that is fully integrated with online payments and distribution & logistics should be sought.• • change services. MVNO. but also service products (for instance a paper bill). e-commerce and fraud detection. Additionally via interfaces: to the OSS system that can trigger events (for instance e-mail) or to BSS reps in case of a fraud event. customer care and can be seamlessly integrated with existing websites. BSS and OSS (operational support systems) platforms are linked in the need to support various end to end services. Fraud Detection The basic fraud detection has to do with high usage. The shop can thus be integrated with distribution. Distribution & logistics Connectivity providers often are concerned with distribution / logistics operations when products are sold through customer care or online sales. Direct Debit. handsets etc need to be transferred from the warehouse to the end-customer and in some cases needs to be installed on-site (fixed). etc. Revenue Assurance Revenue assurance takes place on the field of collections. download settings through OTA. self care. customers or customer care agents are always able to obtain real-time status information about orders. In the online shop not only physical products should be offered. Products like SIMs. Pay-Pal. Each area has its own data and service responsibilities.

Using porting. hybrid or flat fee). Dealer Support The dealer support enables the connectivity provider to: • • • manage dealers. In configuration management (as a part of system management). A typical implementation could become operational within a timeframe of 3-5 months. provided there are standard interfaces to existing parties which offer these services. Number Porting The number porting is specifically required for MVNO's. CSV. creating an overview of all number porting requests & status and the possibility to modify these. PDF or Word). perform order approval for dealer orders. users. Excel. fixed and VOIP suppliers. creating the possibility to analyse the data. It should be possible to outsource the number porting process to third parties. settings should be changed for prices. loggings etc. Availability of third parties and MVNO. MVNO Page 93 of 110 . On request. Postpaid. Dealers can use the dealer module to: • • • sell products and perform in store activation of products and contracts. imports. The possibility to import voucher batches from a third party and distribute these to dealers and agents should be available. Time to market The actual implementation duration depends on: • • • number of interfaces proposition (prepaid. interfaces etc. additional user-specific reports should also be possible to be generated. Reporting Reporting must offer real-time standard reports. the connectivity provider can manage the porting process. which can be exported to various formats (HTML. actions. perform credit checks place bulk orders System Management System management should provide information about running tasks. manage volume discounts and bulk ordering levels per dealer. services.Vouchers are relevant for prepaid propositions or specific marketing events (discount codes).

Pricing (When buying a ready solution – from an MVNE) Pricing is usually based upon three components: license fee. One time fee . a customer base. Maintenance fee is usually based on the number of subscribers in the base.functional maintenance (during office hours or 24x7).license fee (a percentage of the initial fee . they need unique and compelling data services.11 Critical Success Factors Generic • • • • • Identify latent opportunities Create innovative services Flexibility to provide customer-centric solutions Spread awareness of enterprise mobile messaging Ease of use 1st generation MVNO Despite their success so far. 6. Most important. one should cobble together a partnership that consists of a connectivity of a regular telco.setup & implementation. . . . implementation fee and support & maintenance.Owning a strong brand or focusing on niche markets .Proposing innovative content Operational requirements to develop an effective MVNO business • Critical points for a successful launch – Back office what can and should the MVNO do and what can MNO and MVNE handle – Evaluating the cost of providing and managing the various aspects of back office operations and infrastructure – How can MVNO be smarter then MNO when it comes to cost and flexibility – Is prepaid THE optimum solution for an MVNO.license fee.Having efficient distribution channels . . To become an MVNO. For those that have enjoyed success for far.technical maintenance (again during office hours or 24x7).Enjoying marketing skills . this has been based on all or most of the following: . depending on modules purchased.could be around 15%). and a sales channel. is the cost significant lower than postpaid. • Minimum time to market and a flexible operation MNO access especially the ”new” countries: Page 94 of 110 MVNO .setup & implementation infrastructure (in case of own environment) Yearly costs . today MVNOs are not differentiating much from each other by (new) value added services.

services and set up is not always free of choice Timeline: What is YOUR deadline. this have a serious impact on your choise of modell Focus on simple robust start up products Keep the number of interfaces to a minimimum to start with • Back office what can and should MVNO do and what can MNO and MVNE handle o Actual possibilities? Legal MNO Competence o Business case? MNO – trafic margin Cost for the different scenarious Be aware of all the ”extra” cost from the MNO o Can you find a flexible solution? Enabler Outsourcing partner As little as possible at least from day 1 Only tasks that is business critical for your overall mission Only tasks that make financial sense from day 1 • How can MVNO be smarter than MNO when it comes to cost o o o Evaluate what you must own and what you can rent .- o Time.go on “pay as you go” to keep your operational options open and your fixed opex and capex costs to a minimum Keep your dependencies to complex system at a minimum You do not need to control everything – but be in control • Is prepaid THE optimum solution for an MVNO? Is the cost significant lower then postpaid? o Prepaid upsides: – Better Cash flow – “No” bad debt – Pre-provisioned – No or lower billing cost – Transaction cost low – Often first service deployed for MVNO from MNO o Prepaid downsides – Worth of customer database lower – Churn higher – Residebntial ”only” – Channel cost high – Arpu lower (30-50%) – Services available • Roaming • GPRS • MMS • Content Page 95 of 110 MVNO .

supported by a business case built on assumptions and based on deep wireless expertise. determine the risk-reward profile of the venture. economic flows and culture of the wireless industry for years to come. While individual performance will vary. This highlights the importance of crafting a solid MVNO contract that includes margin protection to reduce business risk for the MVNO. If not undertaken correctly. to help determine the course of action to be taken. MVNO Page 96 of 110 . higher churn and less “Value” Postpaid is an option you shall consider from the business case side especially if you already have postpaid/Direct debit customers 6. to some degree. There will be casualties. new MVNOs will need to craft an engaging value proposition for their target customers. then expand. thereby locking the MVNO customer to the network. the large pool of churn customers. Each carrier will be strong in some categories and weak in others. The key here is the decision to either do-it-yourself or leverage through a third-party. but a painful exercise. Carrier choice will vary by MVNO. MVNOs will change the structure. MVNOs will have the dual benefit of making the market more efficient on the cost side and turbo charging the adoption of services on the revenue side. it becomes difficult to move these subscribers. Aside from the carrier selection and deal negotiation. These worries are unfounded. billing) where expertise is widely available. With the increasing number of MVNOs. This expertise is readily available from outside providers. concerns are growing about the dangers of excess competition and price commoditization. releases cash With your own IN you can keep quite flexible products Roaming is coming The cost will be lower but probably lower ARPU. Once an MVNO has partnered with a network operator and acquires a certain number of customers. network quality. The same is true fro back end support structures (customer care. Such decisions. to create a much larger and more profitable market.• • • • • No it is not the optimum solution but it is quick. but virtual operators and network carriers have the best chance of survival. Separating from the carrier is not impossible. An intimate understanding of these elements is essential for MVNOs. while if done well. emerging broadband wireless technologies and compelling economics. wholesale price and MVNO operational-support capabilities. with a decision based on variables such as network protocol.12 Closing remarks New players are making their move: MVNOs are entering the wireless market because of its revenue potential. this contract can become the weal link in the MVNO model. it can power a strong value-creating business. A new business model in the wireless industry is emerging in which consumer spending on telecommunications and entertainment will merge.

MVNOs should partner with an MVNE With an end-to-end solution With experience With features and functionality that add subs to drive profit MVNO Page 97 of 110 . Conclusions 7.1 Conclusions & Lessons to be learned To be Adopted Try to turn the market from offline to Online There is low cost setup implementation (in doing this) Have a strong technical platform with no or minimal maintenance or service failure Avoid fraud Utilize Outsourcing as it works better than in-house Partners DO contribute with their core knowledge Make sure that Supply chain is 100% solid and work with NO errors Arrange Risk sharing with MNO and/or MVNE Focus primarily on sales Make sure that Online marketing is available Approaching Communities is easy To be Avoided It is hard to get into the market (existence of strong players) Operators know how to compete o Long binding periods o Free minutes and SMS Regulation is non-existent or slow and ineffective Turning the market from offline to online is hard and takes time E-payment is not user friendly and it takes time for the user to get familiar with it The market is not as price sensitive as usually expected – even 30% lower prices is not enough Physical distribution is hard to beat online if you’re not patient o Is needed Viral marketing is misused by everybody in the Telcomarket Launching a low-cost proposition using an established brand is a key element for being prepared to the increasing level of aggressiveness and price pressure Brand compatibility makes the difference. especially when it is possible to combine best-price image with quality reputation Being the first makes also the difference Being the cheapest makes also the difference Mobile telephony offer is a good opportunity for extending a fashioned product line of a retailer MVNO or not MVNO is not the question : the best partnership must be the goal Considering a strong partnership rather than just one singular revenue sharing model opens door for other future interesting co-operations… Standard MVNOs Tips MVNOs should focus on branding and growing their business NOT the back office.7.

only 3 or 4 operators with a radio access network. even in a non collusive way As within most network economies.2 Conclusions regarding the future Referring to telecoms. as: There is a guaranteed income due to the monopoly or oligopoly that popped up because the 3 or 4 GSM national licenses were not awarded at the same time. However. As such they are a remedy at least for the access/origination market. the limiting factor for a fully efficient market is the owning of a rare resource not easy to replicate (the local loop in fix telephony. The MVNOs of today are customers centric. Data MVNOs Tips • Data Content MVNOs need all the same things as MNOs and other MVNOs. The limited spectrum allows .per country . These new operators operating a different radio access networks will eventually become MVNO between each other. These new operators will need the GSM network to complete their coverage and so will need to become MVNO. it is expected that the emergence of new (agile) wireless techniques will create new kinds of mobile operators not relying on GSM or UMTS. more content and data-based 3G market. the spectrum in mobile telephony). The GSM operators are vertically integrated and so can behave independently from upstream and downstream. the market shares it acquires during that period create this guaranteed income typical in an oligopoly market. the termination and the roaming market could benefit from MVNO as a remedy. The MVNO model can in fact apply to any network economy with a technological context and with assets not easily replicable. Also. PLUS – Distinct and unique content – Highly topical content (rapidly changing) – Depend on their MVNE • MNOs need Data Content MVNOs – Drive more traffic – Control loss to alternate networks – But MNOs are poorly positioned to serve Content MVNOs • Challenges for Content MVNOs high – Content MVNOs need MVNEs to handle the “details” – MNOs need to open networks Beware • end-users have already experienced the deregulation activities in declining prices and simplified pricing schemes • many MVNOs have entered the market to learn the business and prepare themselves for the emerging. It is because telecommunications are by essence a network economy that the market is inefficient from a competition point of view. IMS has as an objective to create services that are irrespective of the underlying MVNO Page 98 of 110 . The MVNO brings a solution as it forces the mobile operators to unbundle its vertical integration and multiply the number of players.With on-demand scalability With the ability to deliver speed-to-market The right MVNE can deliver profitability to both the MVNO and the host operator. if the first entrant can exploit the spectrum ahead of its competitors. but in several cases that was fatal 7.

VAS servers.radio access network. When IMS will be standard. 20% of MNOs costs) and operational expenditures − fixed interconnection prices determined by the game operator − restricted set of services a MVNO can offer 2.g. Give the players a possibility to act as MVNOs with different strategies − service leaders must select a service mix they intend to offer − requires for modelling financial flows based on service demands per customer group and actual costs to produce a certain service MVNO Page 99 of 110 . the network capacity is bought from actual players − network capacity is bought for a certain period of time − switching costs for a MVNO due to investments to the network infrastructure (e. Implement MVNOs with fixed interconnection cost and the network capacity bought virtually from nowhere − MVNOS implement the cost leader strategy − significantly lower capital (approx. integration costs) − wholesale pricing options for MNOs who decide to sell excess capacity 3. billing and charging systems.3 Three improvement suggestions 1. the need to run a service on several networks will become natural and the service provider will have to become a MVNO. 7. Introduce means for negotiation.

statistics.atkearney.kpmg.mobilevirtualnetwork.com.effortel.gr http://www.com/ http://www.takashimobile.uk/ http://www.au/ http://www.com/ http://www.deloitte.tescomobile.net/ www.siia.co.3gnewsroom.uk http://www.ovum.com/ http://www.co.com/ http://www.co.com) Business plan Pro EUROSTAT http://www.co.com/ www.pyr.uk/ http://www.com/ http:// www.thebesengroup.com/ http://www.wimax-industry.uk http://www.3G.mobilevirtualnetwork.com/ http://www.analysysmason.uk/ http://www. References o o o o o o o o o o o o o o o o o o o o o o o o o o Personal Interviews with Mobile Operators Higher Management Deloitte Surveys (www.mobilein. MVNO Page 100 of 110 .gsmworld.com http://www.com http://www.com www.mvnodirectory.co.eurocomms.8.com/ http://www.atosorigin.com/ http://www.com/ 9.transatel.

Operators are now focusing on revenue stimulation and fighting churn through key competitive factors such as: price elasticity. 3. Figure 1: Western Europe Mobile Operators Total Revenues vs.1 billion in 2007. or 69% of the total revenues for the region. mobile revenues have been growing faster than GDP which demonstrates that the telecom sector has proven to be resilient to the general economic downturn. Greece and Italy have registered penetration rates above 150% in early 2008. Italy.Case Study – Western Europe Cellular revenues Total Revenues generated by mobile operators in Western Europe reached EUR155. cellular revenues have decreased year on year. In markets such as Germany.6 billion Euros. Western Europe recently passed the 500 million cellular connections mark and the most highly penetrated region in the World (120% on average). In Western Europe. loyalty policy. In EU15 countries. Western European mobile operator revenue Western Europe cellular market has reached a level of maturity that is intensifying the level of competition amongst mobile operators. and in a time of general economic slowdown. Belgium. and decline in effective voice price per minute.5% of Gross Domestic Product. value added services and market segmentation which includes MVNO development. Switzerland and Austria. we expect to see a similar relatively healthy growth in mobile revenues. Orange. domestic regulations (Bersani Decree in Italy). competition is getting tougher.Annex 1 . mobile operators are turning their strategies to increasing revenue share and focusing on customer retention. Most countries are now home to 3-4 mobile operators. Non-voice revenues appear to be driving growth as voice revenues remain under strong pressure. Total revenues in the region reached 155. Telefonica O2 and TIM) generated revenues of 106. Keeping the right balance between CAPEX and profitability is sure to be a key challenge for service providers that operate in the region. which equates to a 3. cellular revenues represent 1. Penetration Rate MVNO Page 101 of 110 . network coverage. partly due to: new European roaming regulations.32% growth year on year. Our key finding is that in most countries.32% growth from 2006. T-Mobile. As market penetration continues to rise. quality of services. weakened ARPU. the top 5 operator groups (Vodafone.1 billion Euros in 2007. In 2008.

O2 Germany. In terms of the dominance of major operator groups in the region.9%) over the same period. It is interesting to note that a few markets have rapidly changed over the last two to three years mainly due to high penetration rates and new regulatory initiatives. T-Mobile Deutschland (2. it also means that market leaders are turning their strategies to increasing revenue share instead of customer share. representing nearly 70% of the total revenues in the region. the same rules apply for Vodafone and TIM. weakened ARPU and the implementation of cuts in termination rates. The decline is also justified by the MVNO Page 102 of 110 . Vodafone.7% revenue growth) and Vodafone Germany (7. 25. This shows that the second half of the year is the period when operators generate the highest revenues. or 3. TIM. Telefonica O2 and T-Mobile’s operations in Western Europe altogether reached 106. For instance.Source: Wireless Intelligence. Figures 2 and 3 show the top 10 fastest and slowest growing operators in terms of total revenue growth in 2007 along with their average quarterly connections growth. 24. they were unable to offset the consequences of price pressure. In Italy. those two quarters have always ruled the market dynamics. Whilst there is nothing new in this.3% respectively between 2006 and 2007.1%) have reported negative growth in their total revenues from 2006 to 2007 although their connections base grew by an average of 2% last year. what has changed is that operators are now primarily focusing on customer retention instead of customer acquisition.5% in Q4. has reported a higher revenue growth (15. By default. Although both operators reported an increase in their installed base. This is partly due to pressure on voice pricing.8% in Q2. Germany and Italy are showing signs of a high level of maturity that may lead to a plateau of development throughout 2009.7% in Q3 and 25. 2008 The seasonality in revenue figures has remained unchanged since 2006: 24% in Q1. Orange. in contrast. Q3 holds the summer holiday season and is the battleground of prepay campaigns whilst Q4 is characterized by strong activity during the winter/Christmas holiday season. Both operators have reported a decline in total revenues of 5% and 2.6 billion Euros last year. The remaining 30% is left to local operators and smaller groups such as Telenor. KPN.

implementation of the Bersani Decree which requires operators to eliminate top-up charges from all the rate plans and all top-up channels. As the Italian market is home to 90% prepaid users, the Bersani Decree had a substantial impact on revenues generated by operators since its implementation in March 2007. Figure 2: Top 10 fastest growing operators: Revenue growth vs. average quarterly connections growth, 2007

Source: Wireless Intelligence, 2008 Figure 3: Top 10 slowest growing operators: Revenue growth vs. average quarterly connections growth, 2007

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Source: Wireless Intelligence, 2008 Data usage drives revenue growth Recurring revenues have been estimated at 90% of the total revenues in Q4 last year. Voice revenues represent 78% of the recurring revenues and non-voice revenues hold the remaining 22%. Non-voice revenues show substantial growth of 18% from Q4 2006 to Q4 2007, demonstrating the take off of data usage. Voice revenues are under clear pressure in most markets as efforts from operators to stimulate voice usage have led to a decline in effective price per minute. Despite the competitive environment in Italy, Vodafone and TIM have registered strong growth in nonvoice revenues, with 25.8% and 22.2% growth respectively between Q4 2006 and Q4 2007. In Austria, Mobilkom reported that non-voice revenues represented 30% of its total recurring revenues in Q4 2007 compared to 24.1% in Q4 2006. T-Mobile Austria non-voice revenues represent 22.6% of its recurring revenues in Q4 last year against 15% in Q4 2006. In Portugal, the situation is similar with Optimus and TMN reporting high growth in non-voice revenues over the same period with 25% and 40% growth respectively (20% of their recurring revenues in Q4 2007). Italy, Austria and Portugal all have high penetration rates (over 120%) and have seen a fast adoption of high-speed services. WCDMA Family (WCDMA + WCDMA HSPA) connections already represent just over 15% of the total connections of Mobilkom Austria, T-Mobile Austria, TMN, and TIM. Optimus is already set at more than 30% and Vodafone Italy at 24%. The adoption of mobile broadband along with good network coverage have been key to fast adoption of data usage to drive an increase in non-voice revenues. It is interesting to note that data usage growth is mainly driven by the sales of USB-dongles, and more recently HSPA-enabled laptops. Along with the widespread of unlimited data plans (an average of 20 Euros per month in Western Europe), such offers tend to dilute ARPU but generate incremental cellular connections and incremental revenues for operators. Currently, mobile broadband services are only available to contract users but introducing such services to the prepay market (around 60% of the total connections in the region) will generate higher gains for operators and speed up the adoption of high-speed services.

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Mobile Revenues as a share of GDP According to the OECD (Organisation for Economic Co-operation and Development), the average yearly growth in GDP in 2007 was set at 2.6% in Western European markets (EU15 countries). Over the same period, mobile revenues accounted for 1.5% of GDP. Figure 4 shows mobile revenues as a share of GDP for the EU15 countries, and compares it to revenue growth and GDP growth in 2007. It shows how disparate Western European countries are and the difficulty in correlating cellular revenues growth and GDP growth. However, we came to the conclusion that in most countries, mobile revenues are growing faster than GDP. We can identify some groups of countries that seem to follow similar patterns and profiles: Greece, Finland, Ireland, Spain and Netherlands: all 5 markets have reported a growth in mobile revenues faster than GDP growth. In those markets, the average penetration is around 120% (a part from Greece already at 165%) and GDP growth in 2007 is around 4%. United Kingdom and Sweden: both markets have reported mobile revenues growth faster than GDP. The average penetration is around 120%, GDP growth in 2007 is around 3%. Portugal and Denmark: both markets have reported mobile revenues growth (around 6-7%) faster than GDP growth. The average penetration is around 120%, GDP growth in 2007 is around 3%. Germany, Belgium, Switzerland and Austria: average penetration is around 110%, GDP growth in 2007 is around 3%, but all four markets have reported a decline in mobile revenues in 2007. France and Italy: two exceptions. France is showing a market penetration below the 100% mark (82%) and GDP growth below the 3% average in 2007. Although it is reporting a 3.1% growth in mobile revenues last year, the market is lagging behind in terms of high-speed network coverage. Italy is highly penetrated (153%) and is reporting the slowest GDP growth amongst those countries (1.4%) in 2007. Its decline in mobile revenues is mainly due to implementation of new European and domestic regulations as well as price pressure amongst operators. Figure 4: Mobile Revenues as share of GDP, 2007

Source: OECD, Wireless Intelligence, 2008. GDP figures have been extracted from the OECD online database on the 02/09/2008.

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MVNO Page 106 of 110 .10.

Annex 2 . There is price flexibility also in the mobile communication sector 2. MVNO Page 107 of 110 .MVNO Experience The highly competitive Nordic • • • • • The customers are harder to get then planned The internal procedures and the amount of work needed is underestimated Everything takes time and even though it is a ”light” solution many interactions has to be solved = You have to work in parallell Keep as much as possible simple and standard Telogic track record is 28 days – from start to commercial launch Conclusions 1. Brand diversity is new in the mobile communication sector–but a recipe for success in many other lines of business.

3. Customers are not prepared to pay for everything that is technically feasible MVNO Page 108 of 110 .

and any other revenue not generated directly by network subscribers. including all recurring and non-recurring revenues. Non-recurring revenue: All revenue reported that is excluded from recurring revenue. messaging. Commonly includes revenue from equipment. interconnection and roaming but excluding revenue from handset sales and connection fees. Recurring revenue: Revenue generated by subscriber use of the network including voice.Glossary 3G 3rd generation mobile system 3GPP 3rd generation partnership program developing global specifications BSC Base Station Controller BTS Base Transceiver Station Core Network The systems that control traffic flowing to and from the RAN CRM Customer Relationship Management CS Circuit Switching GPRS General Packet Radio Service GSM Global System for Mobile Communications HLR Home Location Register ICT Information/Communication Technology IMS IP Multimedia Subsystem IMSI International Mobile Subscriber Identity IN Intelligent Network IP Internet Protocol ISN Intelligent Service Node IT Information Technology MGW Media Gateway MMSC Multimedia Messaging Service Center MNC Mobile Network Code MNO Mobile Network Operator (host) MSC Mobile services Switching Center MSS Mobile Switching Solution MVNE Mobile Virtual Network Enabler MVNO Mobile Virtual Network Operator NGN Next Generation Network OSS Operation and maintenance subsystem OTA Over-the-air technology PLMN Public Land Mobile Network Service Delivery Platform A platform used to deliver non-voice services to a mobile customer SGSN Serving GPRS Support Node SIM Subscriber Identity Module SMSC Short Message Service Center SS7 Signaling System no 7 UMA Unlicensed Mobile Access UMTS Universal Mobile Telecommunications Services VMSC Visited Mobile services Switching Center VAS Value Added Services VoIP Voice over IP VPN Virtual Private Network WAP Wireless Access Protocol Total revenue: Total operator reported revenue. data. MVNO Page 109 of 110 . Voice revenue: Recurring network revenue attributable to voice services.Annex 3 .

GDP: Gross Domestic Product.Non-voice revenue: Recurring network revenue attributable to non-voice services including messaging. Denmark. Sweden. Belgium. Greece. France. Ireland. Switzerland and United Kingdom. at constant prices. Netherlands. Spain. EU15 countries: Austria. Portugal. Internet browsing and other data services. Italy. Germany. MVNO Page 110 of 110 . Finland. GDP data has been sourced from the OECD online database on 02/09/2008. downloads.

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